News flash: The job market stinks
* Nonfarm job creation was a paltry 18,000 in December. That was a sharp drop from 115,000 in November (which, in fairness, was upwardly revised from 94,000) and the slowest rate of job creation going all the way back to August 2003. It was also far below the 70,000 jobs economists were looking for.
* The unemployment rate spiked to 5% from 4.7%. That's the highest since November 2005 and worse than the 4.8% rate economists were expecting. It's true that average hourly earnings rose 0.4%, slightly better than the 0.3% gain expected. But you can't take much solace from that given the bad news in the rest of the report.
* The diffusion index, which measures how many industries are adding workers vs. how many are shedding them, came in at 48.4 for the private nonfarm sector. That was down from 52.2 and the worst reading since September 2003. Among industries, construction shed 49,000 workers, manufacturing dropped 31,000, and retail eliminated 24,000. Education/health added 44,000 jobs and services added 93,000, a decent showing though down sharply from 160,000 a month earlier.
The market reaction? The dollar is falling, stock futures are plunging, and bonds are rising. It's worth pointing out the yield curve is steepening dramatically, with the 2-year note yield down more than 11 basis points but 30-year bond yields off only about 2 bps.