The January jobs report estimated that 113,000 workers were hired to nonfarm payrolls in January, well below the consensus Wall Street estimate of 180,000.
The release caused a negative knee-jerk reaction in markets, but traders have faded the initial moves, and S&P 500 futures are now higher than they were prior to the release.
Reactions from Wall Street economists and strategists are pouring in.
Here’s what they are saying (emphases added).
ALAN RUSKIN, DEUTSCHE BANK: “
The data is not in the sweet spot where global growth concerns are ameliorated, so the data does not fit comfortably with long carry or a full comeback in EM. However, the short EM story has at least temporarily run out of gas. In addition, the market is rightly sceptical about serious weather distortions, and most analysts will expect a serious rebound in U.S. activity in the months ahead. As such, count me as a sceptic that the bond rally will show any follow-through. This should also fit with a degree of equity and overall FX risk resilience.”
MILLAN MULRAINE, TD SECURITIES: “Outside of the disappointment on the headline front, the underlying guts of this report were quite encouraging. Beyond the lower unemployment rate — in spite of the surge in labour force participation — gains in aggregate hours worked (up 0.1% m/m) and average weekly earnings (up 0.2% m/m) point to a positive underlying momentum. Other key indicators such as unemployment duration declined, with both median (down from 17.1 weeks to 16.0 weeks) and average (down from 37.1 weeks to 35.4 weeks) unemployment duration measures falling significantly. The employment-to-population ratio also rose, climbing to its highest level since late 2012 at 58.8%. Finally, the alternate measure of unemployment (the U-6) declined precipitously, falling to a new cycle low of 12.7% from 13.1%, suggesting further strengthening in labour market momentum. Outside of the disappointment on the headline payroll front, and especially the weak performance in service-sector employment, the underlying guts of this employment report were unusually strong. The report showed broad-based improvement in a variety of ancillary labour market indicators, pointing to a reduction in labour market slack. For the Fed, this report will confirm their current bias for reducing the pace of asset purchases, consistent with their expectations for the strong momentum in economic activity during the last six months of the year to be sustained in 2014. And as the weather distortions in the data begin to dissipate, we expect the tone of economic data to improve.”
PAUL ASHWORTH, CAPITAL ECONOMICS: “Looking at the breakdown, retail employment fell by 13,000, while public sector employment fell by 29,000. Those declines will grab the headlines, but the 6,000 dip in education and health is arguably the biggest shock. The health sector has been one of the biggest contributors to job growth over the past few years, but over the past two months ,employment in that sector has fallen. Whether this is an unexpected consequence of the implementation of the Affordable Care Act is open to question. Otherwise, construction employment rebounded by 48,000, following a 22,000 decline in December, which adds to the evidence that the bad weather may have been a factor in December, but wasn’t in January. Despite the disappointing gain in payrolls, the unemployment rate nevertheless fell to only 6.6%, from 6.7%. That puts it only fractionally above the 6.5% threshold that the Fed originally used to illustrate when it might first consider raising the fed funds rate. The labour force increased by 523,000, while the household survey measure of employment increased by 638,000. According to the BLS, the incorporation of the new population controls explains only a small fraction of those gains. If anything, we suspected that the expiry of extended unemployment benefits would drive the labour force lower last month.”
IAN SHEPHERDSON, PANTHEON MACROECONOMICS: “With the household survey — NOT directly comparable to payrolls, but it’s all we have — showing 157,000 fewer people than usual kept away from work by the weather, it is hard to pin the blame on the severe winter. The seasonal adjustment, however, was very unhelpful relative to January of last year, for reasons which are not clear. Had last year’s January seasonal factor been used this year, private payrolls would have risen by 265,000. The details as published show construction, the sector hit hardest by the weather in December, rebounding. Payrolls rose 48,000, after a 22,000 drop. Manufacturing was solid too (+21,000), so the problem is in private services, up only 66,000 after 102,000 in December and 204,000 in November. Retail, temps and health all much weaker than last fall. This is impossible to
square with the robust ISM non-manufacturing employment index and a host
of other surveys, including NFIB small business hiring index, now at its highest since September 2007. We have to expect stronger numbers ahead; remember the next FOMC meeting on March 18/19 is after the February jobs report, so these January data, though weak, do not necessarily mean the Fed is set to pause its tapering. Note the unemployment rate dipped because household employment is reported up 638,000. That surely didn’t really happen, but the trend in unemployment is down.”
CHRIS LOW, FTN FINANCIAL: “It’s unusual for the household and payroll surveys to diverge by so much. Maybe the weather not only depressed payrolls in December, but also in January, though that seems unlikely given the rebound in weather-sensitive construction and manufacturing. Or, maybe, some of the people who lost unemployment benefits in January have had jobs all along, they just weren’t the kind of jobs you tell the Labour Department about when there’s a chance you might lose unemployment benefits. Further complicating things, the annual population adjustment was this month. The BLS says it accounts for just a few tens of thousands of the job gains in the household survey in January, but the adjustment has corresponded with unusual household job gains in the past that never showed up in payrolls. The population adjustment boosted nonfarm payrolls in 2013, lifting the monthly average from 182,000 to 194,000. Confused yet? You should be. The market reaction — equity futures and bond yields tumbled on the headlines but climbed back on the details — reflects the conflict between two months of very weak nonfarm payroll growth and three months of very strong household employment. As is occasionally the case with the employment situation report, it could take months to ferret out the truth.”
More to come as we get it…
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