So we conclude this holiday week with the economic fireworks of the NFP report. Yes, I know that was a little lame. With the lead-in of the robust ADP number which remember was 71k ABOVE consensus we had to have a NFP number that was greater than the +100k consensus, right?? Wrong!! The number came in at +80k which yet again confirms what I regularly say about the ADP report in relation to the NFP report which is that it means nothing but it does add market volatility to the NFP report by creating expectations.
The disconnect between the 2 reports is comical. But anyway, the markets are responding to the report as you would expect which is bonds up and stocks down. The 10yr is at 1.56% which as we anticipated yesterday is a modest rally from last night’s close. Here are the highlights of the report:
- +80k jobs which is below the +100k consensus.
- Unemployment Rate remains unchanged at 8.2%.
- The May and April revisions were pretty much a wash with a net loss of 1k.
- Private sector jobs grew @ 84k vs. a loss of 4k government jobs- This is not a selling point for the Obama Administration who have been claiming that the private sector was expected to see the boost in employment due to the many rounds of stimulus. So while the private sector did gain vs. government jobs the gains are below what one would expect after a few trillion dollars worth of stimulus.
- The gain in private payrolls is the smallest since Aug ’11- This amplifies the above point.
- The Labor Participation Rate remained unchanged @ 63.8%- Just to be clear on what this is which I find to be interesting… It is a % of working age people which is defined as 16-64 who are employed or are unemployed but looking for a job. It does not include students, homemakers or people who are under the age of 64 who are retired (I guess all those city workers who retired at 42 after putting in their excruciating 20yrs on the job). Is it me or is that number too low? Well it is because the number historically is in the high 60’s which still seems low to me.
- Average hourly earnings grew to .3% from .2%. This is the only good nugget in the report but that is a bit of a stretch. I guess there is always a ray of hope somewhere.
- The average work week grew to 34.5 from 34.4.
Bottom-line: This is not a good report but it is not as bad as the prior reports. Therefore the markets are reacting in a relatively marginal way. This report does not scream the need for another round of Fed quantitative easing in the form of QE3 but is certainly does not eliminate it either. So given the neutrality of this report I see it being quickly forgotten as the markets shift their focus back to the European crisis.
Have a nice weekend.