U.S. Jobs - There Are No Holes!
This morning, the Labor Department released its January labor report. Subsequently, many have attempted to punch holes, or find disappointment, in the report. Let me be clear. From a Capital Markets’ perspective, there are no holes!
The market consequences are favorable. Only those purveyors of “be in cash” are disappointed. The social consequences may be different; there may be holes to punch. Certainly, Presidential candidates seeking to win the White House from President Obama in November will attempt to do just that. As investors, our job is to focus on the market consequences and leave the social consequences to our weekend discussions, and out of our investment decisions.
Today’s report continues the recent positive trajectory for U.S. Labor conditions. The trend is decisively toward improvement. U.S. corporations have exhausted productivity gains and are now beginning to hire properly skilled workers. We highlighted the potential for this back on November 4, 2011 in a blog post. Risk assets are the beneficiary, as all the major indices are well positioned to challenge last year’s highs. The 10 Year Treasury has responded with a modest uptick in yield, slightly under 2% at 1.95%.
I still expect that the desired strategy is defensive, categorized by assets that need not prove their innocence first. Balance sheet transparency, proven capital allocation strategies, and consistent earnings growth are what investors should be seeking. As an example to that point, I would much rather hold a Microsoft (MSFT), Caterpillar (CAT), or the corporate bonds of select financial institutions, than be tempted by the staggering year-to-date returns for a Netflix (NFLX) or Sears (SHLD).
January U.S. Jobs Report
• The Unemployment Rate declined from 8.5% to 8.3% (Figure 1.1)
• Headline change in jobs was + 243,000 up from last month’s +203,000 and ahead of estimates for +140,000 (Figure 1.2)
• Private Sector jobs gained +257,000 up from last month’s +220,000 and ahead of estimates for +160,000 (Figure 1.3)
• Manufacturing jobs gained +57,000 up from last month’s +32,000 and ahead of estimates for 12,000
• Average weekly hours: 34.5 versus 34.5 last month and estimates of 34.5
• Underemployment rate fell to 15.1% from 15.2% last month
Figure 1.1 U.S. Unemployment Rate
Figure 1.2 U.S. Headline Jobs
Figure 1.3 U.S. Private Sector Jobs