Here's What Wall Street Is Saying About Today's Terrible Jobs Report
Here is what they are saying:
Alan Ruskin, global head of G-10 FX strategy at Deutsche Bank: "One of the most confusing employment reports in quite a while. Most of the report is very weak, with the notable exception of the most important single variable, the unemployment rate. It does seem like weather influence in the report, most obvious in the fall in construction, that is likely representative of negative weather effects elsewhere. Most sector payrolls were weak, with the exception of retail trade - that bodes well for the strength of the consumer. The data will make both policymakers and the market take a pause for thought. Since bond bears were obviously dominant, it is no surprise to see a large positive Treasury bond response. However, in most markets I would expect limited follow-through from here, since it is extremely doubtful that the 87,000 private payrolls number is anywhere close to representing the underlying growth picture, while the 6.7% has again been achieved in the main by a slide in the participation rate and probably overstates strength. Nonetheless, in coming months, it is the faster unemployment rate downward trend that is likely to be sustained, much more than weak payroll growth."
David Ader, head of government bond strategy at CRT Capital: "A weak gain of course, with the oddity of the drop in the unemployment rate a function of a drop in labor participation, so people leaving labor force, and so not a strong sign. The Fed recognizes this, and while 6.5% might be the threshold idea, we can offer that as the drop is due to participation, the Fed will offer a lower threshold de facto. Weather clearly had an impact, with 273,000 out due to weather, really twice the norm, and so seasonals are a function here. Still, drop in work week and soft wage gains are there. Bottom line - taper is a bit up in air, but we think they will taper at a soft level (no more than $10 billion) as weather is such a factor. Our odds have shaved down from near 100% to more like 70%, however. They won't accelerate, of course. Note market bid but inhibited by the last FOMC day's closing levels (our target you may recall)."
Ian Shepherdson, chief economist at Pantheon Macroeconomics: "The payroll numbers are the wildest of wild cards in recent memory and make no sense in the context of all the other labor market data. Weather effects may account for some or even all the shortfall, with the household survey reporting the the biggest number of people unable to work due to the weather in December since 1977, but note this number - 273,000 - is not seasonally adjusted and cannot just be added to payrolls to derive an ex-weather payroll number. Taking into account the upward revisions we think payroll growth is now trending at more than 200,000 per month and we have to expect a big catch-up number for January. The drop in the unemployment rate reflects a modest 143,000 rise in household employment and a 347,000 plunge in the labor force, so participation fell 0.2 percentage points to a new low of 62.8%. On a month-on-month basis, these data are not to be taken seriously but the drop in headline unemployment, if sustained, will further embolden hawks to push for faster tapering, fearing rising wage pressure. So far, the wage data show no sign of movement, but we do expect a clear acceleration over the course of the year. Note the annual household survey revisions were trivially small. Bottom line: The Fed will ignore the wild payroll number and taper again on Jan 29."
Andrew Wilkinson, chief market analyst at Interactive Brokers: "Companies added a mere 74,000 to payrolls to conclude the year and by less than half its expected gain of 195,000. That number was looking decidedly low following the earlier ADP report showing 238,000 jobs were added last month. Given the discrepancy, the easy option is to blame the weather. The BLS report today highlighted that adverse weather conditions had kept the most people at home since 1977 (more than one quarter of a million). It feels increasingly at odds with reality to point to the silver lining of a declining unemployment rate when job growth stalls as was the case in December. The headline rate slid by 0.3% as it did in November to 6.7%. But before sounding the warning bells over an economy falling off the cliff at year end, look at the chart of retail employment. Some 55,000 of the net 74,000 came from retail - a sign that retailers are finally accepting that they need bodies on the shop floor and in warehouses and perhaps that they are warming to future prospects. Jobs were lost in government (-13,000), healthcare (-6,000), IT services (-12,000) and construction (-16,000 - owing to cold weather and at odds with ADP data) in December."
More to come...