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Pre-Market Primer: Labor Indicators Suggest October Job Growth

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ADP's report is higher than expected, but not necessarily the best predictor for the BLS report.

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MINYANVILLE ORIGINAL Markets are turning higher today as economic news indicates that hiring might have been stronger in October.

Payroll processor ADP counted 158,000 new jobs in the private sector in October. Its count for September was 162,000, which was far above the Bureau of Labor Statistics' 104,000. ADP's new economic consultant, Moody's, hopes to make the ADP numbers closer to the official reading.

"Businesses are adding consistently to their payrolls," says Moody's chief economist Mark Zandi. "October's job gains were in line with the average monthly gains of the past two years, with sturdy albeit less than stellar growth across most industries and company sizes. Businesses have turned more cautious in recent months, but that has yet to impact their hiring and firing decisions."

In this report, ADP counted 81,000 hires at large businesses and only 50,000 and 27,000 at small and medium businesses, respectively. Usually, smaller businesses lead hiring.

In another preview for tomorrow's jobs report,initial jobless claims last week totaled 363,000, down from an upwardly revised 372,000 in the week before. Economists expected claims to stay flat at 369,000. Another report showed that nonfarm productivity rose 1.9% in the third quarter, and labor costs fell 0.1%. Economists predict that tomorrow's jobs report will show a gain of 125,000 jobs in October, after just 114,00 in September. The unemployment rate probably rose to 7.9% from 7.8%.

At 10:00 a.m. EDT, more positive economic data will be released. The delayed consumer confidence survey is expected to show a 3.7 point gain to 74 for October. Construction spending in September is seen as improving 0.6% after declining by that much in August. Economists also believe that the ISM Manufacturing Index for October will show improvement. The index is expected to hit 51.5 for the second straight month. (Readings above 50 indicate expansion in the sector.)

Stock are set to climb today. Future contracts on the Dow (INDEXDJX:.DJI) rose 0.07% to 13,039.00. S&P 500 (INDEXSP:.INX) futures climbed 0.02% to 1,407.10, and Nasdaq (INDEXNASDAQ:.IXIC) futures gained 0.28% to 2,648.00.

Good news from China helped lift equities this morning. The official PMI manufacturing index showed modest expansion at 50.2 in October, up from 49.8 in September. HSBC's reading was less optimistic, rising to 49.5 from 47.9. New orders improved, raising hopes that the second-largest economy is on the mend. One weak spot was in exports, which declined for the sixth-straight month thanks to lower demand in Europe and the US, according to the HSBC survey.

There have been some upside surprises in earnings today. Exxon Mobil (NYSE:XOM) beat expectations with earnings of $2.09 per share on revenue of $115.7 billion. Visa (NYSE:V) shares rose 2.33% in the premarket after reporting that fiscal fourth-quarter profits almost doubled. The payment processor earned $1.7 billion, or $1.54 per share on $2.73 billion in revenue. Visa's growth was strongest in Central Europe, the Middle East, and Africa.

Netflix (NASDAQ:NFLX) shares surged nearly 14% yesterday after activist investor Carl Icahn reported to the SEC that his firm has taken a 9.98% stake in the company. The filing says that Icahn believes that Netflix is "undervalued due to the [its] dominant market position and international growth prospects," and Netflix "may hold significant strategic value for a variety of significantly larger companies that are engaging in more direct competition with one another due to the evolution of the Internet, mobile, and traditional industry."

LinkedIn (NASDAQ:LNKD) and Starbucks (NASDAQ:SBUX) are scheduled to report earnings after the bell. Analysts are predicting EPS and revenue increases at both companies.

Twitter: @vincent_trivett
No positions in stocks mentioned.
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