Investors sweat on non-farm payrolls report

Due out Friday at 13.30 GMT.

With economic data from around the globe being a little up and down over the course of the last month it appears that both the bulls and the bears are waiting on the sidelines, holding their breath for the next snippet of news in the hope of seeing signs of either a definitive recovery taking place or the economy slipping into "double dip". It seems, however that with each passing week there just seems to be more and more contradiction and somehow I don't think that tonight's Non-farm payrolls reports from the US are going to provide anything other than more of the same.

Sure the US reporting season has been reasonable with many entities coming in at or exceeding analyst's expectations, but when you break the numbers down how much of it is due to increasing top line revenue and how much is due to bottom line savings?

When it come to bottom line savings, sure it's a good thing to see in a company's financials, but shareholders and businesses can not live on savings alone. Nor can they achieve the same profit year after year on cost savings alone, eventually they need to grow sales again.

What's more you have to wonder if savings in a company's expenditure are good for the economy as a whole.

Just what do I mean by that?

Well, if a company was to make savings by reducing it's workforce, then it may be good for the company but at the same time it's going to add to unemployment, which in turn isn't that good for the overall economy. The knock on effect is that the employees that loose their jobs are no longer contributing to the tax system, nor are they able to consume at the same rate and if they have to apply for some form of unemployment benefit, they place further strain on the public finances. It's not really rocket science is it.

So as far as I'm concerned at this point in time until I start to see some real growth in sales, I'm more likely to base my opinion on the current state of the economy on things like unemployment numbers and retail consumption as I think they provide a better picture of the overall health of the economy.