After weaker than expected December jobs data, investors are preparing for the January report, due Friday. In the last month of the year, the economy added 74,000 positions, far below the two-year average of 182,500. Yes, December was a stinker and it may have been negatively impacted by severe weather (the team at Capital Economics believes that “at least half of the slowdown appears to have been due to the unusually heavy snowfall that prevented some people from getting to work and stopped others from conducting business as normal”), but 2013 was pretty good, according to David A. Rosenberg, the chief economist at Gluskin Sheff (h/t NYT’s Floyd Norris).
Rosenberg notes that total employment rose 2 percent last year for a total of 2.26 million new jobs; part timers and those working part-time for economic reasons fell 0.7 percent and 2 percent respectively; the number of people who needed second or third jobs fell 2.2 percent; and job openings increased by 5.6 percent, while layoffs sank 14.3 percent.
These are pretty good results for an economy that grew by just 1.9 percent for the entire year. (On an annual basis, real GDP increased 1.9 percent, but on Q4-over-Q4 basis, real GDP increased 2.7 percent Note: See GDP: Annual and Q4-over-Q4 for the difference in calculations. For the 18 quarters of the current expansion, the economy has grown by about 2.4 percent annually.)
So what about the December problem? Sure, it was just one month and many economists are sticking to the theory that there were some weather related issues. Still, the jobs situation is far from ideal -- employment is still below the pre-recession peak, albeit by less than 1 percent. And the ranks of the long term unemployed (who have been unemployed for more than 26 weeks and still want a job) remain far too large at 3.88 million.
Economists are all over the map with predictions for January’s results, but other indicators, like weekly claims and the employment components of manufacturing and service sector surveys, have shown improvement. As a result, most expect job creation to return to last year’s average rate of about 185,000 for the month. The unemployment rate, which dropped to a five-year low in December, is expected to remain at 6.7 percent.
Weather watchers remind us that it was pretty chilly in January too, so there could be a chill in January’s results. That may be a little Groundhog’s Day-ish for some, but there it is. The BLS will also release its update to previous data, back to January 2009, so be prepared for revisions, especially to last year’s readings.
MARKETS: According to an old Wall Street saying, “As goes January, so goes the year.” Does that mean all is lost for 2014? The statistical support for the so-called “January Barometer” is shaky at best, so let’s not go crazy. US stocks were down for the month, but nearly as much as emerging markets, which tumbled 6.6 percent, according to the broad MSCI Emerging Market Index. Those once high-flying performers have cratered by 22 percent from post-crisis highs in 2011 and by almost a third from the peak in 2007. The downdraft convinced many to bail on the whole lot of ‘em: In this week alone, investors pulled 6.4 billion dollars from emerging stock funds and $3 billion from emerging bond funds. Those panicky investors headed to the safety of US government bonds.
- DJIA: 15,698, down 1.1% on week, down 5.3% in Jan/YTD (worst month since 5/12, worst Jan since 2009)
- S&P 500: 1782, down 0.4% on week, down 3.6% in Jan/YTD (worst month since 5/12, worst Jan since 2010)
- NASDAQ: 4103, down 0.6% on week, down 1.7% in Jan/YTD
- 10-Year Treasury yield: 2.66% (from 2.74% a week ago; best month since 5/12)
- Mar Crude Oil: $97.49, up 0.9% on week, down 0.9% in Jan/YTD
- April Gold: 1239.80, down 1.9% on week, up 3.1% in Jan/YTD
- AAA Nat'l average price for gallon of regular Gas: $3.28 (from $3.46 a year ago)
THE WEEK AHEAD: In addition to employment, the week ahead will feature monthly automobile sales, which likely dipped because of the cold weather and manufacturing and factory data. Investors will be on guard for a fall-off in manufacturing activity after China recently reported a slowdown in growth. On the earnings calendar, social media will be in focus, as Twitter and LinkedIn report results.
10:00 ISM Mfg Index
10:00 Construction Spending
Senate subcommittee holds hearing on recent data breaches at major retailers
CBO releases its U.S. economic outlook
Time Warner, Twitter, Walt Disney, GlaxoSmithKline, Merck
8:15 ADP Private Sector
10:00 ISM Non-Manufacturing
Chain Store Sales
7:30 Challenger Job-Cut Report
8:30 Weekly Jobless Claims
8:30 International Trade
8:30 Productivity and Costs
8:30 January Jobs Report
3:00 Consumer Credit