The U.S. stock market got what it wanted in this morning’s September jobs numbers.
The economy added a disappointingly low number of jobs in September, but the wage and hour figures were strong enough so that the economy does not look to be falling off a cliff.
All in all, the numbers are disappointing enough to buttress the current consensus view on Wall Street that the Federal Reserve won’t begin to taper off its current $85 billion in monthly purchases of Treasuries and mortgage-backed assets until March 2014 and positive enough on economic growth—and especially consumer spending—not to raise worries that the economy is about to slow radically.
As of 1:30 p.m. New York time the Standard & Poor’s 500 was up 0.42%.
The U.S. economy added 148,000 jobs in September. That was down from an upwardly revised 161,000 for August and below the consensus of economists surveyed by Briefing.com of 183,000 jobs.
So much for a strong number that would tell the Fed it was safe to remove stimulus from the U.S. economy.
But the details of the report showed decent strength. Hourly earnings rose 0.1% and the average workweek stayed steady at 34.5 hours. The combination sent aggregate wages up 0.2% in September. That’s not enough to lead to hot economic growth but it is supportive of steady growth in consumer spending.
In a trend that’s likely to reverse as we get closer to the holiday shopping season, full-time employment climbed by 691,000 in September while part-time jobs dropped by 594,000. Wal-Mart (WMT) has said that it will hire 55,000 seasonal workers for the holiday retail push. That would be 10% more than in 2012. Kohl’s (KSS) has said it will add 53,000 holiday workers. That’s about the same as last year.
The employment figures released today for September don’t include the effect, if any, of the government shut down/debt ceiling crisis on the economy. The October report, now scheduled for release on November 8 (instead of November 1) will include those effects but it won’t tell the Fed, which meets on October 30 and December 18, anything about how lasting those effects might be.
Global financial markets think tomorrow’s U.S. jobs numbers for August will be the clincher for the Federal Reserve in its decision to begin tapering off purchases—or not–of Treasury bonds and mortgage-backed assets at its September 18 meeting. Right now, it looks like the U.S. bond market thinks a strong jobs number tomorrow will be a green light for the beginning of a taper. The yield on the 10-year U.S. Treasury has climbed to 2.98% today. (That leaves the 10-year yield just short of the 3% level that I said earlier today yesterday http://jubakpicks.com/2013/09/05/the-yield-on-the-10-year-treasury-inches-toward-3-i-think-thats-likely-to-set-off-an-over-reaction-in-bond-and-stock-markets/ might mark a short-term break/panic in the markets that would be good for a long trade on a drop.)
The consensus among economists surveyed by Briefing.com is that the U.S. economy added 177,000 jobs in August. That would be up from 162,000 in July. And that would keep the upward momentum going in the jobs numbers—pushing the number of jobs added in the last year to 2.3 million—and would probably leave the unemployment rate at July’s 7.4%.
Would that be enough to convince the Fed that the economy is strong enough to handle a modest reduction in the Fed’s program of buying $85 billion a month in Treasuries and mortgage-backed assets? We’re all guessing at this point, but the market’s guess, judging from the upward creep in yields, is that 177,000 or so net new jobs would be enough to usher in The Taper. Read more
I think there’s enough bad news on jobs in the surprisingly strong June jobs numbers announced this morning so that the financial markets can argue that Goldilocks is still on the job.
The strength is strong enough to keep alive talk that the Federal Reserve will begin to taper off its $85 billion in monthly purchases of Treasuries and mortgage-backed securities in September.
But the weakness in the jobs numbers is weak enough to keep doubts alive about a September beginning to The Taper. The 10-year U.S. Treasury fell in price to move the yield up to 2.71%. That’s a jump in yield from 2.51% on Wednesday and the highest yield since August 2011. But that kind of move, while indicating that the bond market believes that the Fed will taper off its purchases in 2013, doesn’t amount to panic selling. Especially considering that this is a low volume trading day.
In June the economy added 195,000 jobs, according to the U.S. Department of Labor. That was well above the projection by economists surveyed by Briefing.com for 166,000 jobs. The Department of Labor also revised May’s job gains to 195,000 from a first read of 175,000.
Aggregate wages grew too—by 0.6%–as a result of a 0.4% increase in average hourly wages and a stable average workweek at 34.5 hours. That kind of increase in aggregate wages is good news for continued growth in consumer spending in the United States.
So where was the bad news? Read more
So far, better than expected economic numbers from the United States have been enough to stem the overnight rout that started in Asian markets.
Nothing better exemplifies this “finger in the dike role” than the difference between the overnight close for the Nikkei 225 index in Tokyo—a loss of 6.35%–and the gains on the ADRs of Japanese stocks trading in New York today. Overnight Toyota Motor was down 4.61%; in New York the ADRs (TM) were up 0.59% as of noon New York time. Mitsubishi UFJ Financial fell 4.47% in Tokyo but was up 1.06% in New York (MTU.) Sumitomo Mitsui Financial fell 3.96% in Tokyo but climbed 1.29% in New York (SMFG.)
The good news from the U.S. economy came in the form of better than expected retail sales for May and better than expected initial claims for unemployment for the week ended June 8.
Retail sales climbed 0.6% in May. That was an improvement on the 0.1% growth in April and ahead of the 0.4% gain projected by economists surveyed by Bloomberg. Initial claims for unemployment dipped to 334,00 for the week that ended on June 8 from 346,000 the prior week. Economists surveyed by Briefing.com had expected 345,000.
Neither set of numbers was especially strong. Almost all of the upside for retail sales came from a 1.8% jump in auto sales that isn’t likely to be repeatable. The initial claims number continues a pattern of hovering on either side of the 350,000 mark that’s compatible with monthly job gains of 175,000 to 200,000.
But coming as these numbers did after markets had been spooked by a World Bank report that cut the forecast for global economic growth in 2013 to 2.2% from the previous 2.4%, the U.S. good news was good enough to stem the rout.
There is nothing in this data, however, to produce a longer-lasting recovery in global stocks, bonds, and currencies. I think that will have to wait until after the Federal Reserve meets next Wednesday and, in all probability, takes no action on tapering or anything else. In its current mood financial markets could well regard that as a disappointment. I think we’re still looking for markets, especially emerging markets, and the market for the dollar to find a bottom.
Some pre-jobs report jitters.
The Labor Department is scheduled to release the non-farm payrolls numbers on Friday. Economists surveyed by Bloomberg are projecting that the economy added 200,000 jobs in March.
That wouldn’t be a great report since economists say that making a significant reduction in the unemployment rate would require something above 250,000 new jobs per month, but 200,000 jobs in March would be enough to reassure investors that the U.S. economy continues to chug along despite the baggage of higher taxes and cuts to government spending enacted by Congress earlier this year.
Today’s release of the ADP jobs survey came in below expectations. The private report, which almost never exactly tracks the government numbers, showed a gain of 158,000 jobs in March when economists had been expecting 200,000 net jobs.
And nerves got stretched a little tighter today when the Institute for Supply Management’s survey of purchasing mangers came in below both the February number and below expectations. The index fell to 54.4 in March from 56 in February. Economists surveyed by Bloomberg had expected a 55 reading on the index. (In this index any number above 50 indicates that the economy is expanding.)
With stock market indexes near all time highs, it’s easy to understand why traders and investors might be nervous about Friday’s jobs report. Read more