The numbers are out and the market reaction is somewhat expected. The ADP Employment number was higher than expected, coming in at 10K when the market expected -60K. Big miss? Well, yes, but as we have mention before, the ADP number is somewhat unreliable and at times difficult to predict. It has been right on at times, but also so far off that it loses some predictive power. The futures increased slightly on the news, but the "rally" was muted, probably somewhat due to the reliability of the number, somewhat due to other news coming out.

The GDP number showed the economy grew at 0.6% in Q1, matching the 2007 Q4 rate. The market expected 0.5%. Take that Recession! Of course, taking out the exports and trade, the GDP was negative, but this was also expected. Given that there are two more opportunities to revise this number over the next two months, and the little room for movement, a negative Q1 GDP is still possible. Inventories rose $1.8 billion, which was only a slight increase compared to the increase of $30.6 billion in Q3, and the $18.3 decrease in Q4. Certainly not as bad as some expected. The market response, while getting a short bump in futures after the news, was also muted, as with the ADP numbers.

Also of interest in the GDP report is how the PCE price gauge rose 3.5%, with the core at 2.2%. The core number continues to be in range but high enough to give the Fed a reason for pausing. Durable goods purchases fell 6.1%, while non-durable spending was down 1.3%. I am sure these numbers are not a surprise to the automotive companies. Residential fixed investment, i.e. housing, was down 26.7%. Ouch. Exports rose 5.5%, imports up 2.5%. No doubt crude oil contributed to the imports.

Back to being on hold for now while we wait for the Fed.

Payroll numbers down 80,000 in March, after falling 76,000 in both January and March. Government hiring kept the number from falling below 100,000 in losses. The unemployment rate was up 0.3% to 5.1%. Average hourly earnings increased 0.3% to $17.86 per hour, up 3.6% from last year. Futures are selling off after an initial spike right before the number (probably some nervous shorts covering positions).

CNN Money mentions that while an unemployment rate of 5% has historically been referred to as full employment, the media and economists now consider it a sign of a recession. The change comes mainly from the way people are now employed. More people are taking part-time jobs, and while not technically unemployed, they may be underemployed.

The unemployment rate is also based on the household survey. When people simply give up, they are taken out of the pool of people "looking for work", thereby affecting the unemployment rate number. Another change is the number of contractors and those that are self-employed. Recently there has been a decline in the number of independent contractor employees. These employees are counted in the household survey, but not the payroll survey (they are not on the employer's direct payroll). They are also usually the first to be cut in a downturn, since they are cheaper to layoff, given severance and benefit issues. In total, it is believed that there were 565,000 additional part-time workers looking for full-time positions, compared to last year, giving a 21.1% jump in the number of underemployed people. This brings the broader measure to 8.9% in February.

The ADP employment report showed an 8,000 job increase in private hiring during March. While not a reason to throw a party, it was better than the expected 70,000 job decrease. ADP has been hit and miss over the last year - sometimes right on, other times wildly different from the Friday employment numbers. Futures traded up slightly on the news.