3／7 盘前

棋王

Market Sends Its Employment Report Regards


The report everyone was waiting for -- and which most people were waiting to disregard (but only if it was bad) -- has been released.  The February Employment Situation report from the Department of Labor was okay on the headline surface, but less okay below the headlines.
Nonfarm payrolls increased by 175,000 .  Nonfarm payrolls for December and January were revised slightly higher, accounting for an additional 25,000 jobs combined.
Private sector payrolls increased by 162,000 。 after rising by 145,000 in January and 86,000 in December.
Hourly earnings increased 0.4%
The unemployment rate ticked up to 6.7% from 6.The average workweek dipped 0.1 to 34.2 hours6%
The initial reaction to the report has been positive, probably because it is evident that the report wasn't bad.  Still, some of the elements that didn't meet the headline eye underscore that the labor market still has problems and that, by extension, so does the US economy.
Long-term unemployed workers (27 weeks or more) accounted for 37.0% of the unemployed versus 35.8% in January
The teen unemployment rate ticked up to 21.4% versus 20.7% in January
Factory overtime edged down 0.1 to 3.3 hours
Aggregate earnings were up just 0.2% in February -- enough to support consumption growth but not enough to drive a big acceleration in demand
Average hourly earnings have increased 2.2% over the year or just 0.6% after inflation
Something else the February employment report showed is that the whole weather excuse isn't as clear-cut as many have made it out to be.  To wit, outdoor-oriented construction payrolls increased once again in February, rising by 15,000 after increasing by 50,000 in January, whereas indoor-oriented information jobs declined by 16,000 after dropping by 8,000 in January.

This market, however, sees what it wants to see and hears what it wants to hear.  The February employment report is being taken at face value, interpreted as good simply because it wasn't as bad as prior reports.

The employment report overshadowed the January trade balance, which was released at the same time and showed a slight widening in the deficit to $39.1 bln  from an upwardly revised $39.0 bln (from -$38.7 bln).  The January number should be factored as a negative in first quarter GDP forecasts.   

In other developments, China saw its first corporate bond default as Chaori Solar was unable to make good on 1 billion yuan worth of bonds.  Vladimir Putin is sticking to his guns (no pun intended), defending Russia's right to protect ethnic Russians in Ukraine.  And grocery retailer Safeway (SWY) is being acquired by Cerberus Capital Management for $9.4 bln or $40.00 per share.

The aforementioned items might have gotten a broader billing on other days, but today is an employment report day.  That matters far more at this juncture because employment trends are the driver of the world's largest economy.  Those trends aren't all they need to be, which is why GDP growth continues to be less than what it can be.

From a policy perspective, the employment report should keep the Fed on its tapering course but it shouldn't move up expectations for the timing of the first rate hike.

The S&P futures are up 10 points and are trading about 0.5% above fair value.  It will be a higher open, because market participants have been able to regard an employment report that they were more than ready to disregard.