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February Non-Farm Payrolls

03/12/2012

On the morning of Friday, March 9, 2012, the February Non-Farm Payrolls report was released by the Labor Department. Let’s take a look at the highlights:
 
•  Non-Farm Payrolls rose +227,000, ahead of the consensus estimate of +210,000
•  Private Sector Payrolls rose +233,000, ahead of the consensus estimate of +225,000
•  Manufacturing Jobs rose +31,000, ahead of the consensus estimate of +24,000
•  The January Non-Farm Payroll figure was revised higher to +284,000 from +243,000
•  The January Private Sector Payroll figure was revised higher to +285,000 from +257,000  
•  The Unemployment Rate remained unchanged at 8.3%, with 476,000 more workers seeking employment
•  The Participation Rate rose to 63.9% from 63.7% (Fig. 1.1)
•  The Underemployment Rate fell to 14.9% from 15.1%
 
Consider…
•  The January Private Payrolls figure of +285,000, after the positive revision, is the biggest private sector monthly gain since February 2006. (Fig 1.1)
•   In the past six months, 1.2 million jobs have been created. That is the best six month stretch since December 2005 thru May 2006. (Fig 1.2) 
•   The number of citizens unemployed for 27 weeks or longer fell on a percentage basis to 42.6% from 42.9%.
•   Government Payrolls fell 6,000, evidence of budget restraint on a Federal and, more importantly, a State level.
 
MARKET CONSEQUENCES:
 
The evidence over the past five months now confirms what we hinted at in the fall – a positive trend in labor conditions. Over the past six months, private sector job growth has averaged +214,000, while Non-Farm Payrolls have averaged +200,000.
 
I suspect the majority of market participants are once again surprised by this week’s price action.  What on Tuesday appeared to be the initial stage of the long awaited correction was quickly reversed and positioned the S&P 500 Index (SPX) to close above last week’s 1369.63 closing price. (Fig 1.3)
 
I guess in the new “social world” in which we live, the evidence was staring at me right on the computer screen Wednesday morning at 4am. After a political “Super Tuesday” and 200 point drop for the Dow, I would have guessed “Super Tuesday” or “stocks” would be trending on social platforms – NOPE!  In fact the number one trending topic was “Peyton” and number two was “IPad3.”
 
What an excellent measure of market sentiment!
 
Fig 1.1 U.S. Participation Rate 8/31/11-Present

Source: Bloomberg
 
Fig 1.2 US Private Sector Jobs – January 2012 biggest monthly gain since February 2006

Source:  Bloomberg
 
Fig 1.3 S&P 500 Index March 2, 2012 to March 9, 2012 (as of 3:15pm Eastern time on the 9th)

Source:  Bloomberg

Virtus Investment Partners provides this communication as a matter of general information. The opinions stated herein are those of the author and not necessarily the opinions of Virtus, its affiliates or its subadvisers. Portfolio managers at Virtus make investment decisions in accordance with specific client guidelines and restrictions. As a result, client accounts may differ in strategy and composition from the information presented herein. Any facts and statistics quoted are from sources believed to be reliable, but they may be incomplete or condensed and we do not guarantee their accuracy. This communication is not an offer or solicitation to purchase or sell any security, and it is not a research report. Individuals should consult with a qualified financial professional before making any investment decisions.