There was enough good news in this morning’s February jobs numbers to keep alive hopes that the recent sluggishness in the U.S. economy is “only cold weather.”
But with the Standard & Poor’s 500 at new all-time highs this week, I’ve got to wonder how long the “I’ll gladly give you job growth tomorrow for another 1% advance in the stock market today” scenario can run.
At some point the economy needs to deliver something other than mediocre job growth.
In February net nonfarm payrolls added 175,000 jobs. That was above the consensus among economists surveyed by Briefing.com of 163,000 net new jobs for the month. The Labor Department also revised its estimate of job additions in January to 129,000 from the prior 113,000. The unemployment rate inched upwards to 6.7% from 6.6% as more workers searched for jobs.
The worst part of the monthly report was that the stronger than expected jobs number didn’t add more to wages in the month. Read more
This morning’s January jobs number was disappointing. The economy created 113,000 net new jobs against a consensus among economists surveyed by Briefing.com of 175,000. The very, very disappointing December total of 74,000 was revised upward, but only by a tiny 1,000 jobs.
And yet the U.S. stock market is up strongly today. As of 2:30 p.m. New York time the Dow Jones Industrial Average was up 0.93% and the Standard & Poor’s 500 was up 1.15%.
It’s important to try to figure out why. Even if you conclude the market is wrong, you need to know what it is thinking since it’s that thinking that drives stock prices in the short run.
Here’s my survey of possible reasons: Read more
I think tomorrow’s jobs number for January is likely to have a big effect on the markets. But I’m not sure we’ll really learn much of anything about the economy because of uncertainties in the data.
I know what the financial markets want to hear—that the paltry 74,000 jobs added in December was an anomaly, that the initial December total has been revised upwards, and that the January total at least matches the consensus forecast of economists surveyed by Briefing.com of 175,000 net new jobs
Those results would argue that the strength in today’s initial claims for unemployment—a decline of 20,000 in the weekly total for the first drop in three weeks—and the improvement in the Purchasing Managers Index for the service sector to 54 in January from 53 in December are truer indications of the strength in the U.S. economy than the drop in the Purchasing Manager’s Index for manufacturing or disappointing retail sales numbers.
But although I think that kind of news would move global stocks higher—and disappointing numbers would push them lower—I’m not sure that the data will mean as much—one way or the other—as the market wants in its current search for direction.
Why ? Read more
Two questions after today’s surprisingly grim December jobs report.
First, why did the U.S. economy add only 74,000 jobs in December? That’s a huge drop from the 241,000 added in November. (This figure was revised upwards from 203,000.) Economists surveyed by Briefing.com were expecting the economy to add 197,000 jobs in December.
Second, why has the U.S. stock market shaken off this big disappointment? The Standard & Poor’s 500 stock index was actually up 0.23% at the close. Emerging market stocks were up even more with the IShares MSCI Emerging Markets index ahead 1.8%. Emerging markets that trade roughly on New York time were up too—Brazil was ahead 0.8% for the day and Mexico 2.1%–so this isn’t just an artifact of markets closing before they heard the bad news.
Explaining this jobs report is basically guesswork at this point. Maybe the U.S. economy isn’t as strong as all the other data have indicated recently. Maybe this disappointing number is a result of statistical error in the always-problematic seasonal adjustments for holiday hiring, especially in a year when Thanksgiving fell so late in November. Maybe the frigid weather in December reduced hiring. Maybe November pulled jobs from December.
At this point we don’t know whether this very disappointing result is a significant data point that should lower projections of the economic trend or a one-off event that doesn’t say much of anything.
Wall Street is certainly more than willing to entertain the possibility today that this number is just a one-off event caused by weather or faulty seasonal adjustments.
But that’s not the only reason for the surprisingly positive response (or in the U.S. markets, the surprising absence of a more pronounced downward move.) Read more
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.