Interest Rate Roundup

Friday, February 01, 2008

January jobs report: First losses since 2003

The latest report on the U.S. job market just hit the tape. The figures showed:

* The economy shed 17,000 jobs in January, much worse than the forecast for a gain of 70,000 (especially after ADP said the economy ADDED 130,000 workers in the month). It's also the first time the economy lost jobs since August 2003 (-42,000). The chart above shows the net gains or losses in jobs, by month, going back several years.

* As it always does in January, the Bureau of Labor Statistics revised its jobs numbers from the past year. Most months saw reductions in job growth, with the net impact a cut of 376,000 jobs to 2007's previously reported numbers.

* Earnings growth slowed. Average hourly earnings were up just 0.2% after gaining 0.4% in December. That was below the 0.3% that economists were looking for.

* The "diffusion" index fell to 46.2 from 50 in December. This number measures how many industries are ADDING jobs against how many are CUTTING them. A number below 50 means more industries are shedding workers than adding them. January's reading was the lowest since August 2003.

* Speaking of industry cuts, the construction sector shed another 27,000 jobs (on top of readings of -45,000 in December and -57,000 in November), and manufacturing lost another 28,000 positions, the biggest drop since August (-45,000).

There weren't many other notable gains or losses, with the exception of education/health (+47,000). Leisure and hospitality continues to add jobs, but the rate of increase is slowing (to 19,000 in January from 22,000 in December, 24,000 in November and 52,000 in October). In fact overall service sector gained just 34,000 jobs in January, the least since October 2005.

Early market reaction? Stock futures have dipped into negative territory. Long bond futures are trading up a half point, while 2-year yields are down 5 basis points and 10-year yields have dipped just over a basis point. The dollar index initially spiked lower, but is now off just 14 ticks. It's worth pointing out, however, that the DXY has been deteriorating over the past several days and it's now within a stone's throw of its multi-decade low (75.05 now vs. the November 23, 2007 low of 74.48).


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