Non-Farm Payrolls were reported at 155,000 jobs added in
December as job growth continued to improve at a lackluster rate.
Economists had been expecting a gain of 150,000 jobs in the month,
more than the 146,000 jobs added in November. Also, the
unemployment rate was flat in December at 7.8 percent from an
upwardly revised 7.8 percent in November. Economists had been
expecting a flat reading from the initial November reading of 7.7
percent for the unemployment rate.
Importantly, private payrolls, total Non-Farm Payrolls less the
public sector, rose 168,000 in December even though economists had
only expected a slight rise from November's 147,000 private jobs
added to 148,000 in December. Also, the Labor Force Participation
Rate, a key measure of job demand from those not currently
employed, stayed near multi-decade lows at 63.6 percent, a flat
reading compared to November's reading of 63.6 percent.
Digging through the report, strong employment gains in
manufacturing and construction point to structural strength in
employment, while the drop in retail employment is probably a
cyclical effect following the increases in hiring before the
holidays around Black Friday. Also, the health care sector added an
astounding 55,000 jobs in December, a strong improvement from
November's reading of only 25,900 jobs added.
Further, the average hours worked and average hourly earnings
increased, a sign that pre-tax income may have improved in December
for many Americans, before the Fiscal Cliff takes away more income
due to tax hikes. The expiration of the payroll tax break and
income tax hikes for those higher-income Americans create a need
for pre-tax income growth just to maintain the economy at current
It is important to note that job growth near 150,000 jobs added
per month is barely enough to absorb the flow of new employees into
the labor force per month. Therefore, it would take consistent
readings above this level over a series of months or years to make
a meaningful dent in the unemployment rate.
Also, as the report is a survey, statistical assumptions are
used and the report has a rather large confidence interval.
Effectively, the reported number is not an exact figure but
suggests that there is a 90 percent chance that the true number of
jobs added is within 100,000 jobs added on either side of the
reported figure. So, if the reported number is 150,000, there is a
90 percent chance that the true number lies between 50,000 and
250,000 jobs added.
The data will most likely mean that the Fed will continue to
ease and print more money, as it has now said that it will print at
a constant rate per month until the unemployment rate falls
significantly. As the unemployment rate is unlikely to move lower
(for good reasons at least) until job growth improves above 200,000
jobs added per month, the Fed is likely to keep the proverbial
spigot open for a lot longer and maintain its loose policy stance.
However, the unemployment rate could decline simply because more
people are leaving the labor force.
Markets were fairly unchanged on the report and remained near
levels seen before the release of the report. S&P 500 futures
ticked slightly higher and rose 2.4 points to 1,456.20 and 10-year
U.S. Treasury Bond yields rose 4 basis points to 1.95 percent
following the release of the data. In currencies, the EUR/USD rose
about 15 pips to 1.3027 on the release and the dollar weakened
against the yen with the USD/JPY declining slightly to 87.91, below
the 88 level seen before the release.
Commodities markets improved slightly after the release, with
front-month WTI Crude Futures down only .9 percent to $92.07 per
barrel and Brent Crude Futures down only 1.1 percent to $110.96 per
barrel. In metals, gold regained some losses and traded lower by
only 2.29 percent following the release at $1,636.50 per ounce
while silver futures were lower by 3.99 percent at $29.50 per
Overall, the report was a non-event and showed that the status
quo of mediocre employment growth and slow GDP growth were the
theme for 2012. The real question that remains to be unanswered may
be more important: will the same prevail in 2013?
(c) 2013 Benzinga.com. Benzinga does not provide investment advice.
All rights reserved.
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