Friday, March 9, 2012
It is hard to use 'good news' and 'Greece' in the same sentence given the unfortunate nation's recent run of bad luck, but we do have some good news out of Greece today. With enough bond holders agreeing to take losses on their Greek government bonds, the country appears on track to complete the contentious bond swap. This should pave the way for the country to receive the fresh bailout from the IMF/EU/ECB troika.
But as welcome as the Greece news is, the market's attention today is focused on the home front, with this morning's better-than-expected February non-farm payroll report putting the spotlight on the labor market.
The Bureau of Labor Statistics reported jobs numbers for February of 227K, compared to expectations of 210K. The tallies for January and December were revised upwards, belying expectations that the last two months' strength was due to one-off seasonal factors. The unemployment rate remained unchanged at 8.3%. Average hourly earnings ticked up, while the average workweek remained unchanged, rounding out an overall very positive labor market report.
The strong February jobs numbers confirm beyond any doubt that the recent improving trend in the U.S. labor market is not due to some temporary seasonal factors, but rather a sign of things to come. This will not only strengthen the economy's growth momentum through its knock-on effects on consumer confidence and household buying power, but could also play a positive role in helping prop up the housing 'green shoots.'
With these numbers now in the open, investors will be trying to handicap the Fed's courses of action and the odds of further quantitative easing. My view is that positive labor market momentum in a backdrop of high gasoline prices and an overall uncertain inflationary backdrop reduce the odds of further quantitative easing. There is simply no need for the Fed to come to the economy's rescue when it can do just fine on its own.
In corporate news, Texas Instruments ( TXN ) lowered outlook for the current quarter in its mid-quarter update after the close on Thursday. Aeropostale ( ARO ), the teen retailer, came out with a positive results, but guided lower.
Director of Research
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