No Clear Direction from the Labor Numbers
Written by: Martin Shields
Yesterday, the payroll numbers for January were released and they provided a mixed bag of news. For the month, a total of 150,000 jobs were added well below the monthly average of jobs added throughout last year and below the expected amount of 190,000. The unemployment rate fell to 4.9% from 5.0%, the lowest rate since February 2008. Some of the weakness could be the result of an extremely strong 4th quarter in hiring and the coastal blizzard in January.
The positive elements of the jobs report was an increase in the average hourly wages rising 12 cents to $25.39, up 2.5% over the past year. After months of job losses or modest gains, manufacturers added a healthy 29,000 jobs last month in a sign that the negative effects of global weakness may be easing. Oil companies continued to lay off workers, shedding a net 7,000 jobs last month.
The Federal Reserve was expected to raise rates four times this year but at this point the bond market is not expecting a rate increase to occur in the Fed’s March meeting as was originally expected. One data point does not make a trend so the big question for investors is whether we see the labor numbers rising over the next several months or continuing to decline. Since consumer spending accounts for 75% of total GDP, a strong labor market is paramount to a strong economy and stock market.
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