Friday, February 4, 2011

Good morning everyone, the BLS just released the monthly situation report for January and the jobs report has disappointed once again.  The consensus was for a gain of +50k to 250k and it came in at +36k with a drop of unemployed to 9% from 9.5%.  The unemployment rate decreased for one of two reasons, one good and one not so much.  The good reason is if the number of people looking for a job  found one and the bad reason is if people looking for a job get discouraged and just stop looking for a job. Both reasons can cause the rate to decline and I believe the reason for January’s drop is weather related and people getting discouraged and dropping out not finding a job.  The December number was revised higher to 121k from 103k and private payrolls was +50k vs an expected +163k as December’s private payrolls was revised higher to 139k from 113k.  The January work week was 34.2 hours vs consensus 34.3 so employers were not working their employees any longer, however the hourly earnings increased 8 cents to average $22.86.  The increased hourly earnings should bode well for future consumer spending.  As I have said many times, all economic numbers are revised for the better in a strong healthy economy and as mentioned earlier, they have done just that.  In terms or what to expect going forward, you have to watch the work week and hourly earnings numbers every month because before employers hire new people they first work their current employees longer and then pay them more, one of which is happening (higher wages).  The conflict is what I see as an improving global economy being led by the US but a lack of hiring. Corporations are doing more with less so that is why the stock market keeps going up.  The companies reporting earnings are doing better financially and stock prices reflect this.  At some point this year, corporate managers will realize that they just can’t work their employees any longer and will need to hire more people or just not be able to grow their business.  I expect to hear that the headline is the 9% unemployment number but the real story is one of confusion and conflicting data.