The ADP employment report came out Wednesday, informing us that employment in the U.S. private sector fell by 298,000 in August. It was not terrible news.

According to ADP's results, the goods-producing sector cut 152,000 jobs in August, including 74,000 in manufacturing, which turned out to be the smallest decline since July 2008. Goods producers are drawing down inventory, as we know, and because of that, their need to lay off workers could be coming to an end.

Moreover, nonfarm private employment in the service-providing sector fell by 146,000, which could qualify as "only 146,000," since it's down from the service numbers in the previous report. Let's consider that a hopeful sign.

Actually, the ADP total job losses were the fewest in any month since last September, having averaged close to 700,000 in the first quarter and 500,000 in the second quarter. According to the firm that designs and computes the ADP survey, this trend should continue and the job market may even begin to show job growth by the last two months of the year. (I think that's a little optimistic, but I could be wrong.)

SERVICE SECTOR CUTS SLOWING DOWN:

The ADP report doesn't include the government sector, though. Economists believe, and anecdotal evidence would seem to back it up, that we may start seeing an increase in government jobs due to the economic-stimulus plan enacted earlier this year and a general upsizing of government (with the possible exception of the Post Office).

By the way, although ADP only picks up their customer activities, it's still a respectable trend indicator. Despite the slowdown in job losses, practically everything ended lower:

MARKET INDEXES, WEDNESDAY, SEPT. 2:

Evidently the market was looking for a positive surprise; there was even talk that we'd see job gains this month in the ADP report. (Yeah, well, we all wanted a pony for our seventh birthday and that didn't happen either.) After opening lower in response to the news, the major indexes soon moved off their lows; but despite several fairly encouraging economic reports, they fiddled around all day and ended fractions lower:

DOW JONES:

S&P500:

NASDAQ:

Earlier in the morning, and foreshadowing the ADP numbers, Challenger's layoff count announcement fell in August, to 76,456 from July's 97,373. Their government component, with a lot of post office cuts, made up half of all layoffs. Non-government categories showed easing levels.

The big Bureau of Labor Statistics employment report comes out Friday. Stay tuned.

Bad economic data is often good for precious metals. Thanks to the blah private-sector jobs report that pressured the dollar and made precious metals look like a good place to invest, gold futures jumped Wednesday to their highest level in three months after a long stretch of sideways trading. Gold for December delivery ended up $22, or 2.3%, at $978.50 an ounce on the Comex division of the New York Mercantile Exchange, at one point topping $981. It was the highest settlement since June 4.

The dollar fell against most major currencies after the ADP report was announced.

THE DOLLAR:

GOLD PRICES:

SPDR Gold Trust, along with miners like Yamana Gold (AUY) and Gold Fields (GFI), had double-digit jumps in volume.

In "lite" news, productivity in the second quarter was revised up slightly with the Labor Department's updated estimate for the quarter. Overall, productivity was up (okay, on cost cutting) by businesses as reflected by a drop in unit labor costs. Q2 productivity was revised to an annualized 6.6% boost from the initial estimate of 6.4%, a little better than estimates. Unit labor costs were revised to an annualized drop of 5.9%, about in line with estimates.

Year-over-year, productivity grew 1.9% in the second quarter, after a 1% gain in the first. Unit labor costs also fell, to minus 1.2% from minus 0.1%.

MANUFACTURING PRODUCTIVITY, annualized percentage change:

As I've said many times, often until people start to leave the room, cutting jobs and hours to get a rise in productivity and a drop in unit labor costs doesn't really improve consumer earning power. Nor is it the way we want to see profits increased. I promise I won't say it again. For a few weeks.

And from the Commerce Department, factory orders were up 1.3% in July, the biggest increase since June of last year and extending a run of decent gains including that nearly 1% rise in June. Durable goods orders, boosted by an aircraft-related jump 18.5% in transportation goods, jumped 5.1 percent for the biggest gain in two years (plus 4.9 percent first reported).

Motor vehicle orders fell 1.3% with this component likely to reverse given empty dealer lots following the big cash-for-clunkers stimulus promotion. Sadly, nondurable goods orders fell 1.9%, the largest drop this year and reflecting declines in petroleum and coal products.

LIGHT MOTOR VEHICLE SALES, seasonally adjusted:

Inventories were down 0.7% in the month. Shipments were unchanged, but they included a second month of solid gains for capital goods.

The factory sector has already bottomed and genuinely looks like it's beginning to recover. Declining inventories are nice. Let's see some real hiring.

The Energy Information Administration reported a mild 0.4 million barrel draw in crude oil and a big 3-million barrel draw in gasoline last week. A 1.2-million barrel buildup in distillates is offsetting that a bit, along with weak demand for jet fuel, down what you might call a whopping 12.1%. Bullish for oil, though, with gasoline demand steady at a year-over-year 0.5% with refineries operating at a somewhat-increased 87.2% of capacity, with increased runs for both gasoline and distillates.

Oil ended the day off its reaction-high, but still up a penny. Are the high-$60s where oil will remain for a while?

CRUDE PRICES:

Probably the biggest threat to a steady recovery right now is this grim specter of debt that won't go away. Sustainable economic growth needs rising consumer earning power. All consumers. We'll recover, but for the time being in fits and starts.

Speaking of oil, you may know that in the industry, a monster find is known as "an elephant." That's what giant BP Plc (BP) has on its hands in the Gulf of Mexico, if reports Wednesday are to be believed. BP said it had made the "giant" find at its Tiber Prospect by drilling one of the deepest wells ever sunk by the industry. Analysts think BP's new elephant could contain over one billion barrels of recoverable reserves. Recoverable reserves refers to how much of the "oil in place" can be exploited, anywhere from 20% on up. With a 35% recovery rate, and perhaps four billion barrels in place, BP's proven reserves would rise by 868 million barrels.

BP is already the biggest oil producer in the U.S. and biggest leaseholder in the Gulf of Mexico; it has a 62% working interest in the block; Brazilian state-controlled Petrobras (PBR) owns 20% and ConocoPhillips (COP) owns 18%. The company did nicely today:

BP PLC:

Just out of curiosity I checked to see whether the big oil find would knock alternative energy prices today. Shares of solar energy companies, at least, held fairly steady, but the industry has not had a good summer. For one thing, solar energy remains far more expensive to generate than energy from coal, oil, natural gas or even wind. (One thing keeping alternative energy alive is that $3 billion in subsidies.) The cost of solar is still out of reach of average homebuyers; solar-panelizing an average house costs something like $16,000. However, that may be about to change: A big inventory buildup and scary overcapacity are having a serious effect on the solar panel industry. Inventory is averaging 122 days this year vs. 71 days last year, while the amount of capacity actually utilized dropped from 48% last year to about 28% this year.

Making matters worse, China, already a low-cost producer, is dropping prices to $1.80 a watt for polysilicon-based products; in the third quarter of 2008, the average selling price was $4.05 a watt. And now, to reduce shipping costs, China's Suntech (STP) plans to announce by the end of the year that it will build a solar panel assembly plant in the U.S. Average selling prices could drop below $1 a watt next year and even further in 2011. As is always the way in the inevitable shake-out of any industry after the first delirious rapture, many of the 200-odd solar manufacturers may not survive. Despite its Q2 income drop, reduced 2009 forecast, Suntech should make the cut. The stock is off 33% in the last month; could be a buy for those with nerves of steel:

SUNTECH:

If you're idly wondering what's preventing highly-touted wind power from lighting your living room, it's largely due to the U.S.'s aging and ill-placed transmission lines: the lines are in or near cities, the wind is mostly out on the lonesome plains. However, Woodward Governor (WGOV) is helping utilities adapt wind systems to their power grids; it makes the equipment that turns the wind turbine's kinetic energy into electrical energy. The company saw a 38% decrease in Q2 profit due to restructuring charges, but raises its guidance for the year 2009. It could gain mightily from the stimulus package.

Another name to watch in this space is American Superconductor Corporation (AMSC), a wind-farm engineering consultant and a manufacturer of voltage regulation systems and power converters. The company not only gets upfront customer payments, it gets continuing royalty payments from its turbines. In May it reported its first quarterly profit in its history, three cents a share. It also had a backlog of nearly $560 million at the end of March. Price to earnings, earnings growth and sales ratios are all pretty high, but there's no debt, there's about $100 million in cash, and the company is moving into China and India.

AMERICAN SUPERCONDUCTOR:

And oops, the Mortgage Bankers' Association's purchase index slipped 1% last week. The refinance index fell 3.1%. Mortgage rates were down in the week with the average 30-year mortgage averaging 5.15%, down 9 basis points. Let’s chalk it up to the fact that nothing happens in late August (unless you're maybe in the toy or winter-wear business).

On a slow earnings day, homebuilder Hovnanian (HOV) reported earnings after hours. It narrowed its loss in the third quarter partly on slashed costs, partly on signed contracts for new homes, but the results disappointed Wall Street anyway. Hovnanian's results were pretty much a reflection of most major homebuilders recently: New orders are picking up as buyers respond to lower prices and other incentives, but sales remain well-below year-ago levels and profitability is, so far, out of reach.

Frantic for some really good news, I found drugmaker Sepracor (SEPR), who makes sleep-aid Lunesta, spiking 26.46% on news that the company will soon be the target of a $2.7 billion takeover effort by Japanese pharma Dainippon Sumitomo:

SEPRACOR:

Tomorrow stand by for the European Central Bank announcement (the first meeting of the month is usually interest-rate related), Jobless Claims and the Natural Gas report. Del Monte Foods (DLM), Layne Christensen (LAYN) and Ciena Corp. (CIEN) report earnings.

Also coming up: Analysts expect the early results of the back-to-school selling season to be weak Thursday when retailers report their August results. (Are you surprised?) The results will give insight into whether consumers are finally dusting off their credit cards, how well back-to-school offerings like jeans, dresses and T-shirts are being received and incidentally, how the Christmas shopping season is likely to shape up. Labor Day falls a week later this year and several states' tax-free shopping weeks occurred in August this year rather than July, which makes year-over-year comparisons difficult. Probably August and September together will give a more accurate picture. Parenthetically, retail buying for the teen market has to be one of the top 10 tough gigs in the world.