The economy added a net 36k jobs in Jan, 50k of which was in the private sector which was well below expectations of 146k in total and 145k in the private sector. The two prior months were revised up by a total of 40k. The unemployment rate though unexpectedly fell to 9% from 9.4% because a 117k increase in household employment didn’t nearly keep up with a huge 504k drop in the labor force. It’s of course better to see a drop due to a large job increase relative to the labor force rather than a large drop in the labor force relative to job gains. The all in rate fell to 16.1% from 16.7%. Disappointingly the avg duration of unemployment rose to 36.9 weeks, a new high. Positively, avg hourly earnings rose .4%, twice expectations and are now up 1.9% y/o/y. With inflation pressures rising, we need to see wage gains keep up. Those unable to work due to weather totaled 886k compared to 259k in Jan. Bottom line, who knows.

While the headline payroll figure is difficult to analyze because of weather influences and likely other things, US Treasury yields on the longer end have broken out to the upside with the 10 yr yield in particular rising to 3.6% for the 1st time since early May ’10 and the 30 yr yield rising to 4.70%, the highest since Apr ’10. Maybe Treasuries are responding to the healthy jump in avg hourly earnings of .4% m/o/m and 1.9% y/o/y, the best since Feb ’10 which is interesting considering the ‘slack’ in the labor market. Also of focus could be the drop in the unemployment rate even though it wasn’t really for a good reason, a large drop in the labor force.

Category: MacroNotes

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One Response to “Payrolls and all its noise”

  1. sbhatta says:

    What confused me about the Employment Report yesterday was that the ISM Manufacturing and Non-Manufacturing results this week were very healthy, both with very positive employment components. Any thoughts on the lack of follow through into the Payrolls result? I understand that the ISM Non-Manufacturing is a good predictor for Payrolls in particular.