EmailOne thing about employment report Fridays is that the futures market is typically subdued ahead of the release of the data. Today was no exception.
There were reports highlighting encouraging services PMI data for the eurozone; there has been a batch of mostly better-than-expected earnings results; and the Greek debt swap negotiations continue to drag on. None of that seemed to matter, though, in front of the January employment report.
The S&P futures were basically flat heading into the 8:30 a.m. ET release of the employment data. They aren't flat anymore.
The S&P futures are up 12 points following a strong employment report for January that surprised on virtually all fronts.
Nonfarm payrolls increased by 243,000 (Briefing.com consensus 155,000); nonfarm private payrolls increased by 257,000 (Briefing.com consensus 168,000); the unemployment rate fell 0.2 to 8.3% (Briefing.com consensus 8.5%); the average workweek was unchanged from an upwardly revised 34.5 hours (Briefing.com consensus 34.4); and hourly earnings increased 0.1 to 0.2%, which was in-line with expectations.
The increase in earnings and payrolls led to a 0.4% increase in aggregate income levels. That level is indicative of strong consumption growth.
Importantly, the job gains were fairly broad-based. Manufacturing and construction payrolls rose by 50,000 and 21,000, respectively. The strongest growth, though, was seen in professional and business services, which jumped by 70,000.
In conjunction with annual benchmark revisions and updated population estimates, it was noted that the employment-population ratio held at 58.5% and that the labor force participation rate slipped 0.3 to 63.7%. The number of unemployed dropped to 12.8 mln in January from 13.1 mln in December.
Separately, November nonfarm payroll growth was revised up to 157,000 from 100,000, while December saw a slight uptick to 203,000 from 200,000.
Altogether, the benchmark revisions added an additional 266,000 nonfarm positions for 2011.
The main soft spot continues to be the area of long-term unemployment. Individuals out of work 27 weeks or more accounted for 42.9% of the unemployed in January versus 42.5% in December and 43.9% in the year-ago period.
The U6 unemployment rate, which accounts for marginally attached workers, dipped to 15.1% from 15.2% in December.
The last two statistics, in particular, will continue to be the focal points of policy debates on the labor market. Nonetheless, the headlines from the January report are going to play well for the general populace in media reports and should be effective in lifting consumer confidence.
At the same time, these headlines are going to play well for the Obama Administration. The unemployment rate is still far too high, yet the trend in the unemployment rate is what is going to resonate on the campaign trail.
Setting politics aside, the improving trends in the labor market should play quite well for the equity market, which is cognizant that the labor market remains the most important dynamic in terms of the U.S. economic and earnings outlook. Both just got a reassuring boost, as did the relative value argument for equities, from the strong January employment report.
With the current indication in the futures market, the S&P 500 stands poised to open at a level that is 100% higher than the low from March 2009.
--Patrick J. O'Hare, Briefing.com
Patrick J. O'Hare is Chief Market Analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial, please email researchsales@briefing.com.
