Friday, January 10, 2014
??????This morning’s surprisingly weak U.S. jobs report runs counter to all recent economic data. The numbers seem unbelievable as they are out of line with all data that we have seen lately. Perhaps we shouldn’t pay much attention to this report as it will most likely get revised away in the coming months.
The bond market’s reaction of pushing yields lower following the jobs release appears over-done as the Fed is unlikely to change its Taper plans on the basis of one-month data. This report aside, all other data is consistently pointing towards positive momentum in the U.S. economy. Wednesday’s ADP (ADP) report, Thursday’s Jobless Claims and lay-offs readings and the employment components of the two ISM surveys were all foretelling what we found in today’s jobs report.
The U.S. economy grew at a robust +4.1% growth pace in the third quarter and initial estimates for Q4 GDP growth were no better than +1%. But those estimates started going up following a steady run of better-than-expected economic readings, reflecting momentum in consumer and business spending and less drag from trade and inventory accumulation.
We wouldn’t know the Q4 GDP figures for another few weeks, but current estimates are for growth in the +3%. If Q4 growth does come in that vicinity, the economy’s growth pace will have roughly doubled in the second half of 2013 from the first half’s pace.
Many in the market, the Fed included, view this to be the ‘real’ underlying trend in the economy and would likely discount today’s jobs reading. That said, the unusually weak jobs report does add an element of uncertainty to the economic landscape.
Sheraz Mian???
Director of Research
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