In a disappointing nonfarm payroll report for January, fewer than expected jobs were created. The ‘miss’ was particularly striking given the many other reports that were pointing otherwise.
On the positive side, the unemployment rate dropped significantly and the originally reported number for the prior month was revised upwards. However, even accounting for the very unfavorable weather we have been getting recently, these numbers are very disappointing.
The Bureau of Labor Statistics reported the creation of 36,000 jobs in January, with private sector jobs at 50,000. Expectations were for private-sector job creations of around 150,000. On Wednesday, the ADP had reported private-sector jobs of 187,000.
The unemployment rate dropped to 9% from 9.4% in November; the expectation was for an increase to 9.5%. The December number was revised to a gain of 121, 000 from the originally reported 103,000 number. In line with expectations, the average workweek dropped and average hourly earnings ticked up.
The dismal payroll numbers are completely out of sync with other important indicators that have been showing positive momentum in the labor market. The ADP has been reporting strong monthly gains and the Jobless Claims data has been sharply coming down over the last few months. The employment component of the ISM manufacturing index this week reached its highest level since the early 1970’s. Comments from some industry players, such as Manpower (MAN), corroborate this trend.
Broad measures of economic growth have also not only improved but moved decidedly into much more sustainable territory. The fourth-quarter GDP growth rate was devoid of the temporary growth drivers that had been characteristic of the economy’s turnaround thus far. Economic expansion in the last quarter of 2010 reflected consumer spending and corporate investments, with government spending and inventory adjustments essentially missing in action.
The consumption strength was also on display in the holiday shopping season and other metrics of retail sales. We saw yesterday that retailers like Macy’s (M) had impressive same-store sales numbers in January despite the extremely unfavorable weather in large parts of the country.
This evolving environment positions consumer-centric companies for strong performance this year. Automakers look particularly interesting, particularly following the recent group-wide pullback following Ford’s (F) soft-looking quarterly numbers.
But for this trend to fully take hold, the payroll data needs to start reflecting the overall improvement that is more than evident all around us. We didn’t get that in today’s nonfarm payroll report.
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