Strong employment report
On the surface today's employment report was stunningly strong. The unemployment rate dropped from 6.7% to 6.3% and 288,000 new jobs were created, more than any analyst's estimate. Various interpretations may find some reasons to not exactly stand up and cheer these numbers, but we'll take them readily, without too much skepticism.
A major reason that the unemployment rate fell so precipitously was that 800,000 people dropped out of the labor force. With unemployment benefits no longer available, some potential workers didn't need to maintain the facade of looking for work that was not coming their way. Additionally the social security eligible boomers are growing by the day and for those with other resources, that could be enough to dissuade job searchers. As to the components of new jobs, retail and construction apparently led the way. Retail generally translates into low paid work but construction can be well paying, depending on the geographic area and especially on the skills of those hired. Overall wage growth was flat. Should it be wages were flat, as "growth" doesn't work here.
Despite those caveats, the reported numbers were indubitably strong, and that will have the effect of reinforcing the Fed's inclination to continue its so-called taper, reducing their liquidity building asset buying. Additionally interest rates could be nudged up in the not too distant future. From this perspective this is all good, but short term market traders will no doubt not see this as marginally shaking the status quo, and giving equities a little higher hurdle.
The market's initial enthusiastic response to the employment numbers has been restrained by this balancing act between good news and the near term impact of the good news on Fed policy. The most influential overhang on the market this afternoon is the developing situation in Ukraine. Here at 2pm, the market has a long way to go before the day's close. More later perhaps.
A major reason that the unemployment rate fell so precipitously was that 800,000 people dropped out of the labor force. With unemployment benefits no longer available, some potential workers didn't need to maintain the facade of looking for work that was not coming their way. Additionally the social security eligible boomers are growing by the day and for those with other resources, that could be enough to dissuade job searchers. As to the components of new jobs, retail and construction apparently led the way. Retail generally translates into low paid work but construction can be well paying, depending on the geographic area and especially on the skills of those hired. Overall wage growth was flat. Should it be wages were flat, as "growth" doesn't work here.
Despite those caveats, the reported numbers were indubitably strong, and that will have the effect of reinforcing the Fed's inclination to continue its so-called taper, reducing their liquidity building asset buying. Additionally interest rates could be nudged up in the not too distant future. From this perspective this is all good, but short term market traders will no doubt not see this as marginally shaking the status quo, and giving equities a little higher hurdle.
The market's initial enthusiastic response to the employment numbers has been restrained by this balancing act between good news and the near term impact of the good news on Fed policy. The most influential overhang on the market this afternoon is the developing situation in Ukraine. Here at 2pm, the market has a long way to go before the day's close. More later perhaps.
posted by John Borden at 2:08 PM
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