KEY DATA: Job Cuts: 61,582/ Claims: 365,000 (up 3,000)

IN A NUTSHELL: “Firms keep announcing more layoffs, small businesses are hiring and jobless claims are at record lows, and you wonder why I am confused?”

WHAT IT MEANS: Tomorrow we get the April employment report and hopefully the headline numbers will not continue to confuse things. Yesterday’s ADP private sector job growth estimate was a major disappointment but like the weather, if you don’t like the number, just wait a day. Of course what we saw today hardly clarifies the situation. On the disturbing side, Challenger, Gray and Christmas reported that announced layoffs surged in April to its highest level in three years. The energy sector is driving the rise with about one-third of the layoffs and all of the increase placed at the feet of falling oil prices. For the first four months of the year, layoffs notices are up by 40,000 while energy sector announcement have surged by 55,000. Texas accounts for 35% of the total notices as the Texas economic miracle turns into the Texas economic mess.  With energy prices rising, some of those notices may be rescinded and future announcements will likely be a lot lower.

There is a lag between announcements and actual job cuts and so far, few of those notices have turned into layoffs. Jobless claims rose modestly but adjusting for the size of the workforce, we are at record lows. Texas actually reported a decline in claims. Since payroll changes are calculated as the difference between hiring and firing, we go into tomorrow knowing that the firing portion of the equation is low. That holds out hope that the total job gains will be better than expected after the ADP number came out.

Supporting the view that the job picture is still quite strong was the release of the National Federation of Independent Business’s April employment survey. Firm hiring remained strong and plans to add workers keep increasing. The biggest problem is finding qualified workers and the jobs openings index reached levels not seen since before the recession hit. Of course, paying higher wages might help, but that was not part of the survey.

MARKETS AND FED POLICY IMPLICATIONS: I remain convinced the labor market is in a lot better shape than the consensus seems to believe. Expectations are for job gains of about 220,000 tomorrow. Even if the March number is revised upward to 150,000, that would give us a two-month average of only 185,000 and a three-month average of about 210,000. In contrast, the economy added 260,000 jobs per month between March 2014 and March 2015. Has the trend dropped by 50,000 a month? Makes no sense to me, even if you factor in the oil patch problems. Indeed, if we stay anywhere near the current level of jobless claims, the paucity of job cuts points to payroll gains closer to 300,000. But that is just one economist’s view. The uncertainty, though, has to be playing on investors’ minds, especially with the 10-year Treasury rate rising 30 basis points in one month. In any event, we will know soon enough how many jobs the economy actually created.