The jobs report did not put to rest fears of loss of momentum
in the U.S. economy, though the market doesn't seem to be overly
concerned, at least going by the pre-open sentiment. Perhaps
investors see a Fed silver lining to this report or may be they
are going with the 'weather explanation'.
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The 'headline' jobs tally of +113K came short of expectations by
a wide margin, the second month in a row of sub-par labor market
showing. Disappointingly, we didn't get much revision to the
December number that many were looking for (December's +74K tally
now rose only +75K). The private sector added +142K jobs in
January vs. +89K in December and November's +272K tally.
The unemployment rate ticked down, with a modest pick-up in the
participation rate more than getting offset by stronger gains in
the household survey (the unemployment rate comes out of the
household survey, while the jobs tally comes out of the
establishment survey). The unemployment rate has now dropped by
0.6% since October 2013, an unusually fast decline rate for this
The report shows the construction and manufacturing sectors
adding jobs during the month, which run counter to what we saw in
the ISM index and weather playing a role in this report.
Construction added +48K jobs in January after the -22K loss in
December, with gains on both the residential and non-residential
sides. Manufacturing jobs were up +21K in January vs. +8K in
December and +35K in November. This report is showing
acceleration in manufacturing jobs in January from the prior
month, contrary to what the employment sub-index of the ISM
survey showed on Monday.
Coming after the weak ISM and Durable Goods readings, today's
report keeps alive questions about the U.S. economic outlook.
Weather has been unusually erratic this year, but it's hard to
tell at this stage whether the soft data is due to
weather-related distortions or there is real loss of momentum in
the economy. Since weather hasn't improved in any meaningful way
in February either, we will likely to have to wait for some time
before this issue gets definitely resolved.