Interest Rate Roundup

Friday, February 02, 2007

Latest take on the jobs market

One of the biggest economic reports just hit the tape -- the January jobs report. Here's the skinny ...

* Nonfarm payrolls rose by 111,000 in January. That's below the 150,000 average estimate of economists polled by Bloomberg. However, there were sizable revisions to the past few months' figures. December job creation was revised up to 206,000 from 167,000 ... November jobs were revised up to 196,000 from 154,000 ... and October jobs were boosted to 109,000 from 86,000. Gotta love those gubmint bean counters!

* The unemployment rate nudged up to 4.6% from 4.5% in December. That was a tenth higher than the average forecast. The household employment indicator (which is based on a smaller survey than the one that determines nonfarm payrolls) was weaker. It showed a rise of only 31,000 jobs, a substantial drop from readings of 303,000, 286,000, 431,000, 288,000, etc. in recent months.

* What about the breakdown by industry? Manufacturing lost even more jobs -- 16,000. But that was it for losing industry groups. Construction ADDED 22,000, one of the biggest gains in a long while that was probably helped by the warm early January weather. We also continued to see decent growth in several services sectors, like education and healthcare (+31,000), leisure and hospitality (+23,000) and business services (+25,000)

* Average hourly earnings gained 0.2% on the month, below forecasts for 0.3% and the previous month's reading of 0.5%. The year-over-year change in average hourly earnings slowed to 4% from from 4.2% in December.

The market reaction? A rally in Treasuries. Long bonds were recently up 9/32, while 10-year T-Note yields were down about 3 basis points to 4.80%. Technically speaking, we're back in an area of congestion around the 110 and change level in the long bonds after failing to hold the breakdown from last week. In other words, quite a mixed picture. But "jobs day" is notoriously volatile so the close is extremely important.

In collateral markets, the Dollar Index is down about 13 bps, helping send gold and other commodities markets (like oil) up. Meanwhile, stock futures are in love with the "soft landing" nature of the numbers.


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