I’ve been out all morning, but here are my thoughts on today’s employment report.
Before the numbers came out, I said I was looking for a mediocre report because that is the sort of not too hot, not too cold kind of report which won’t force the Fed’s hand. By in large, I think that is what we got.
First of all, I’m not really stressed about the census workers issue. A lot of people have been subtracting them to get to the underlying trend of job growth. That exercise is fraught with peril. It may give you a read on where job growth is trending. However, it may mislead us because census jobs add income to the economy right now and that’s what is needed. Ultimately, what is important right now is that we see enough of a kick on employment in order to maintain cyclical factors like inventory builds which will overcome the threat of a double dip. So, when I see non-farm payrolls at +162,000. My initial reaction is positive.
Goldman is out with a note saying that the +162,000 was due mainly to the hiring of temporary census workers (48,000) and an improvement in weather. We’ll see next month if that is indeed true. However, Goldman had an aggressively high +275,000 NFP number before the ADP dashed their hopes. Even after Wednesday’s disappointing ADP report, Goldman was expecting a 200K print. So, their analysis does indicate that this was not a robust number despite the headline.
One positive data point was the increase in weekly hours worked, something that presages more hiring. Two negative data points: the underemployment rate (U-6) moved higher to 16.9% and average hourly earnings fell. As I have been saying, unless people are making more money, any increase in consumption is unsustainable except through the accumulation of debt.
Bottom line: this jobs report was mediocre. the headline number is the kind of thing you like to see and supports increased consumption over the short-term. However, the details were a bit murky and that means the Federal Reserve is off the hook; easy money rates will continue for now. Net-net, this is about as good as it’s going to get right now.