Employment Stabilizes...For Now

We're going to see a positive employment report tomorrow. It's a no-brainer at this point:

• Last week's U.S. GDP report showed the first real pick up in business investment since the crisis started.
• The monthly ADP private-sector payrolls report today showed its smallest loss since the low points of the financial crisis.
• The last monthly payrolls report showed continued growth in temporary jobs.
• Share prices for Manpower, Kelly Services and other staffing firms have jumped more than 20% over the past three months and have doubled over the past year.

But an inflection point has already been priced in -- there won't be a strong market reaction tomorrow absent some other development -- and the real question is how much organic growth we'll see going forward as government support peters out, inventories get back in sync with demand and pent-up demand is satisfied.

The drama going forward is what will happen in the second half of 2010 and first half of 2011 as the crutches disappear (assuming they'll be taken away) and how much of this has (or hasn't) been priced into the markets.

The recent pickup in weekly jobless claims is an early sign that growth is unlikely to be strong and consistent enough to offset productivity gains and bolster demand for workers.