By Carlos Guillen

Investors have taken yet another pause as they stop to look at the latest jobs picture, which showed a strong deceleration in private sector jobs gained. Clearly, the latest result was much worse than expected and is serving to cast a dark cloud over the more widely viewed Department of Labor figures released this coming Friday.

This morning's ADP report was rather concerning, but everyone will be looking at Friday's jobs numbers for a clearer snapshot of the current employment situation. According to ADP, 119,000 private sector jobs were gained during April, well under the Street's estimate calling for a gain of 170,000 jobs and significantly below the 201,000 added jobs in March. In April, the payroll gains were driven by small and medium-sized businesses, which added an estimated 58,000 and 57,000 jobs, respectively. Large business payrolls increased by just 4,000. Most of the added jobs came from the services sector, which ADP said added 123,000 jobs. On the other hand, the goods-producing sector saw a decline of 4,000 positions. While the private sector jobs increment was concerning, it is apparent that, as a result of the warmer than normal weather, the strong job gains experienced during the first quarter of the year took some of the jobs that would have normally been added in the second quarter. Perhaps a bit encouraging was that April represented the 27th consecutive month in which jobs were added to the economy. Nonetheless, the deceleration in job gains is likely to result in a slightly increasing unemployment rate when it comes out at the end of the week.

Perhaps serving to provide some support for equities was that Chinese manufacturing data continued to show some gains. A Chinese manufacturing index from HSBC Holdings Plc today rose to 49.3 from 48.3 in March. That was above a preliminary 49.1 reported April 23. While the bad news is that the result still suggests an economic contraction, the good news is that it is trending in the right direction, in line with the official purchasing managers' index which was released yesterday and rose to 53.3 in April from the 53.1 achieved in March.

On the European front, German unemployment unexpectedly rose in April as the debt crisis in the euro area constrained growth and hiring in Europe's biggest economy. The number of people out of work increased a seasonally adjusted 19,000 to 2.87 million. Economists had forecasted a decline of 10,000. The adjusted jobless rate was unchanged at 6.8 percent, still representing a two-decade low.

Overall, while the jobs data have been the main reason why equity markets are in the red today, the effects have been small, as the Dow Jones Industrial Average has just lost 20 points or 0.2 percent. Friday should be an interesting day full of drama as most on the Street expect to see a flat unemployment rate at 8.2 percent, but given the deceleration in jobs growth, we think this will not likely be the case.

Euro Manufacturing Tailspin
By David Urani

We now have the global manufacturing picture, with the Markit Eurozone PMI results having been posted this morning. Yuck might be a good word to describe the situation across the pond, with overall Eurozone manufacturing activity at a 34-month low. Consequentially, the EU's unemployment rate hit 10.9%, matching the 1997 high. The re-recession over there is in full swing and frankly it's worrisome for all of us.

The current poster-child for Europe's ills, Spain, posted a 34-month low which doesn't come as much of a surprise but is certainly alarming. The dire employment situation over there also worsened to 24.1% from 23.8%. The results were weak enough that the IBEX 35 is looking to take out the 52-week low again, and that puts it very close to the 2009 low as well. Make no mistake, this is a full-on crisis. Luckily, the Spanish 10-year bond yield remains below the 6% level that it hit last month, which indicates Spain's financial emergency is in check for now. Nevertheless, you have to doubt if it can take much more of a beating without the alarms ringing again on the debt situation.

IBEX 35 - 5 year

The next most worrisome PMI has to come from Germany which hit a 33-month low. Of course, we know that Germany has been a pillar of strength for Europe through its export economy, but now the situation has really gotten a hold over there and with a reading of 46.2 (50 separates expansion from contraction), the country's manufacturing picture is now solidly negative.

And then there's Italy, which after having slowed its decline following the debt crisis last year, plunged last month all the way from 47.9 to 43.9. And with Italy and Spain having taken up most of the spot light in recent months, you might have forgotten about Greece where the situation continues to be dismal, with a 40.7 reading last month. The UK has been resilient, and held on barely to growth with a 50.5 reading (down from 51.9).

Given all the problems over in Europe it's a wonder that the USA posted that great ISM PMI number yesterday (up to 54.8 from 53.4). With all the talk that we are losing our grip on greatness, we certainly continue to be world leaders right now. Actually, given all the weak results on regional manufacturing, durable goods and others, I find it a little tough to believe that we actually posted our best reading since June of last year. Nevertheless, corporate earnings have been coming in fairly well, with domestic business standing out.

And then of course there's China, which according to Markit stayed slightly in the contraction zone at 49.3, but increased from 48.3. But actually, China's official PMI showed growth at 53.3 and it's a little tough to say which one is more accurate (you do have to be careful sometimes with info coming from the Chinese government). Whichever one you look at, both increased for the month. We know a European export decline has hurt China, and that's why the country continues to push a policy of higher imports and domestic growth. In fact, China is looking at lowering tariffs on a number of "everyday" commodities and goods. However, a hotter inflation reading in March (to 3.6% from 3.2%) may put a little doubt on potential fiscal stimulus.

In the end the USA and China, arguably the two driving engines of the global economy these days, are managing to pull it together as Europe crumbles. But you have to wonder if it can stay that way with Europe going downhill so quickly.