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Benzinga Forecasting Non-Farm Payrolls, Recapping Today's Economic Data (SPY, GLD, TLT, QQQ, UUP, XLF)

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Initial jobless claims rose in the week ended May 26 and the economy continued to grow near stall speed, according to data released this morning. Initial jobless claims increased 10,000 last week to 383,000 and the prior week's number was revised higher to 373,000. In other employment news, the ADP Private Sector Employment Report, which tends to be a very good indicator for the monthly Non-Farm Payrolls set to be released tomorrow, showed an increase in private sector hiring, but a miss of expectations. The private sector added 133,000 jobs last month, increasing 20,000 as compared to April's revised reading of 113,000, which was lower than the initial reading of 119,000. All in all, the data shows a continued slowdown in the pace of the employment recovery.

The second estimate of 1Q GDP by the Commerce Department also showed continued economic weakness, as the economy only grew 1.9% in the first quarter, less than the initial estimate of 2.2%. The consensus estimate was +1.9%, and so this number was in line with expectations. The commerce department also indicated that fourth quarter GDP of 2011 grew 3%, showing that the economy is slowing heading into the summer months. The commerce department noted that personal consumption, exports, fixed investment, and inventory investment added to GDP while federal government spending and local government spending subtracted from GDP.

The GDP report did show that inflation continued to be a problem in the first quarter, with prices paid by US residents increasing 2.4% year-over-year compared to 1.1% in 4Q2011. Excluding food and energy, prices rose 2.3%, compared to 1.2% in the fourth quarter. One important line item of the report showed a significant slowdown in government spending, even before the fiscal cliff is set to hit the US economy. As the Commerce Department reports, "Real federal government consumption expenditures and gross investment decreased 5.9 percent in the first quarter, compared with a decrease of 6.9 percent in the fourth. National defense decreased 8.3 percent, compared with a decrease of 12.1 percent. Nondefense decreased 0.8 percent, in contrast to an increase of 4.5 percent. Real state and local government consumption expenditures and gross investment decreased 2.5 percent, compared with a decrease of 2.2 percent."

Lastly, the GDP report notes that corporate profits increased $11.4 billion in the first quarter, as compared to the $16.8 billion increase in 4Q2011. Cash flow from operations for corporations also decreased. Domestic profits for financial companies (NYSE: XLF) increased $20.6 billion in the first quarter, a slowdown from the fourth quarter's increase of $29.9 billion.

Tomorrow is the Non-Farm Payroll release, and the market is looking for an increase of 150,000 jobs month-over-month, as compared to last month's dismal 115,000. The consensus range is from 95,000 to 206,000 and has a standard deviation of 22,000 jobs, meaning that there is a lot of uncertainty surrounding this release. Benzinga's estimate for the release is +124,000, which is less than consensus, but decelerating employment indicators and increasing headwinds to corporate profits may have led to a slowdown in hiring.

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