Economy adds 304,000 jobs in January, pulverizing expectations

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Published Date 2/1/2019

January employment data didn’t disappoint; while the unemployment rate, expected at 3.9% increased to 4.0%, non-farm jobs (thought to add +158K) increased to 304K jobs. December jobs reported initially at 312K revised to 222K. Private jobs, expected at 160K, increased to 296K. December private jobs initially reported +301K revised to 206K. Average hourly earnings expected to increase +0.3%, but as reported added +0.1%, with yr/yr earnings adding +3.2%, unchanged from December and as expected. Even with the revisions in December, the job market improved more than forecasts. The decline in average hourly earnings did balance the increased jobs in terms of market reactions. The 10-yr note yield prior to the 8:30 am ET employment traded at 2.64%, +1 bp from yesterday. By 9:00 am the rate increased to 2.65%. MBS prices on the initial reaction dropped -2 bps from yesterday’s close.

Job gains were the highest in the last 11 months. The increase does add to the view that the economy may not be as weak as some have begun to believe. Thing is, the volatility in the data cannot be trusted; revisions and a decline in average hourly earnings doesn’t impress. There isn’t anything in the January data that should change the concerns that the economy will slow in 2019 since the US can’t stand alone as the global economies move toward recession. The increase in the unemployment rate is thought to be a result of the government shutdown, but this is another view we can’t abide; the workers furloughed were not unemployed, and the BLS hopefully didn’t count them in the calculations.

At 9:30 am the DJIA opened up +81, the NASDAQ dropped -25, and the S&P added +2. The 10-yr note rate stood at 2.65%, +2 bps from yesterday.

At 10:00 am the January ISM manufacturing index, expected at 54.0 from 54.1 in December, increased to 56.6.

Also at 10:00, the final January University of Michigan consumer sentiment index, expected at 91 from mid-month at 90.7, increased to 91.2.

US/China trade talks wound up yesterday. President Trump is lauding it as a big step forward in getting a trade deal. China announced it will “substantially” increase imports of US soybeans and both sides planned further discussions to reach a breakthrough with only a month to go before the Trump administration is set to ratchet up tariffs. Trump said yesterday that for the next round of talks he would send Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer to China in mid-February. Trump received an official invitation from the Chinese leader. Earlier, he tweeted that “no final deal will be made until my friend President Xi, and I, meet in the near future.”

Source: TBWS

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