Friday, March 7, 2014
Finally a better jobs report, despite all the weather-related
distortions. Not only the 'headline' tally comes ahead of
expectations, but the report's internals are also pointing in the
right direction. We may not have sorted out the weather issue
entirely, but this is definitely welcome news.
A total of 175K non-farm jobs were created in the economy, ahead
of consensus estimates that had steadily been coming down
following Wednesday's weak jobs tally from payroll processor ADP.
Importantly, the tallies for the prior two months were revised
higher by a total of 25K, with January going up to 129K (from
113K) and December going up to 84K (from 75K). The private sector
added 162K in February, up from 145K in January and 86K in
December (the 263K private sector jobs created in February 2013
seem to be from a different era altogether).
A material positive in the report concerns wage gains, which went
up +0.4% from January to $24.31 per hour. Average weekly hours
ticked down to 34.2 hours, likely a function of weather-related
distortions. The relatively fewer jobs created by the goods
producing sector (22K in February vs. 50K in January) are
also likely pointing in the weather direction. Of the industries
within the goods producing side of the economy, construction jobs
were down materially from the month before while manufacturing
jobs were essentially unchanged. The unemployment rate ticked up
to 6.7% from 6.6% the month before.
The overall 'level' of jobs created in February isn't that much,
but what matters for the markets is the level of 'surprise' in
the report - and the 'surprise factor' in today's report is
positive. It's all relative to expectations and estimates had
come down materially in the run up to this report. Expectations
for 2014 Q1 GDP estimates have also come down quite a bit in
recent weeks, increasing the odds of positive economic surprises
down the road. All in all, a favorable backdrop for stocks.
Director of Research
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