Most Popular
1. THE INFLATION MONSTER is Forecasting RECESSION - Nadeem_Walayat
2.Why APPLE Could CRASH the Stock Market! - Nadeem_Walayat
3.The Stocks Stealth BEAR Market - Nadeem_Walayat
4.Inflation, Commodities and Interest Rates : Paradigm Shifts in Macrotrends - Rambus_Chartology
5.Stock Market in the Eye of the Storm, Visualising AI Tech Stocks Buying Levels - Nadeem_Walayat
6.AI Tech Stocks Earnings BloodBath Buying Opportunity - Nadeem_Walayat
7.PPT HALTS STOCK MARKET CRASH ahead of Fed May Interest Rate Hike Meeting - Nadeem_Walayat
8.50 Small Cap Growth Stocks Analysis to CAPITALISE on the Stock Market Inflation -Nadeem_Walayat
10.Apple and Microsoft Nuts Are About to CRACK and Send Stock Market Sharply Lower - Nadeem_Walayat
Last 7 days
Where’s my self-driving car? - 16th Aug 22
Real Reason why Pakistan and India Gained Independence in 1947 at 75th Anniversary - 16th Aug 22
Electronic Payments Can Benefit Your Business - Here’s How - 16th Aug 22
Qualcom Stock Market Harbinger - 12th Aug 22
Apple Exec Gets World's 1st iPhone 14 for Daughters 14th Birthday Surprise Present Unboxing! - 12th Aug 22
Steps to remember while playing live roulette online - 12th Aug 22
China Bank Run Protests - Another Potential Tiananmen Square Massacre? - 11th Aug 22
Silver Coin Premiums – Another Collapse? - 11th Aug 22
Gold-to-Silver Ratio Heading Lower – Setup Like 1989-03 - 11th Aug 22
Severe Stocks Bear Market: Will You Be Among the Prepared 1.5%? - 11th Aug 22
There's a Hole in My Bucket Dear Liza, UK Summer Heatwave Plants Watering Problem Song - 11th Aug 22
Why PEAK INFLATION is a RED HERRING! Prepare for a Decade Long Cost of Living Crisis - 9th Aug 22
FREETRADE Want to LEND My Shares to Short Sellers! - 8th Aug 22
Stock Market Unclosed Gap - 8th Aug 22
The End Game for Silver Shenanigans... - 8th Aug 22er
WARNING Corsair MP600 NVME2 M2 SSD Are Prone to Failure Can Prevent Systems From Booting - 8th Aug 22
Elliott Waves: Your "Rhyme & Reason" to Mainstream Stock Market Opinions - 6th Aug 22
COST OF LIVING CRISIS NIGHTMARE - Expect High INFLATION for whole of this DECADE! - 6th Aug 22
Recession Is Good for Gold, but a Crisis Would Be Even Better - 5th Aug 22
Stock Market Rallying On Slowly Thinning Air - 5th Aug 22
Stock Market Trend Pattren 2022 Forecast Current State - 4th Aug 22
Should We Be Prepared For An Aggressive U.S. Fed In The Future? - 4th Aug 22
Will the S&P 500 Stock Market Index Go the Way of Meme Stocks? - 4th Aug 22
Stock Market Another Upswing Attempt - 4th Aug 22
What is our Real Economic and Financial Prognosis? - 4th Aug 22
The REAL Stocks Bear Market of 2022 - 3rd Aug 22
The ‘Wishful Thinking’ Fed Is Anything But ‘Neutral’ - 3rd Aug 22
Don’t Be Misled by Gold’s Recent Upswing - 3rd Aug 22
Aluminum, Copper, Zinc: The 3 Horsemen of the Upcoming "Econocalypse" - 31st July 22
Gold Stocks’ Rally Autumn 2022 - 31st July 22
US Fed Is Battling Excess Global Capital – Which Is Creating Inflation - 31st July 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

U.S. Jobs Report Rained On New Fed Chair Yellen’s Honeymoon Period

Stock-Markets / Employment Jan 11, 2014 - 08:06 AM GMT

By: Sy_Harding


Once again, the Labor Department’s monthly employment report lived up to its reputation of providing a surprise in one direction or the other.

The economy created only 74,000 new jobs in December compared to the consensus forecast for 200,000.

No one saw that coming, and the bull/bear debates over what it means have begun.

Most economists have it that the plunge in jobs is not a negative since the cold weather in December obviously affected hiring. (Is it not just a bit odd that they were not able to factor that ‘obvious’ weather situation into their forecasts prior to the report?).

Yet in spite of such a substantial drop in new jobs, the report also showed the unemployment rate unexpectedly plunged significantly, from 7.0% to 6.7%, compared to forecasts that it would tick up to 7.1%.

And analysts have it that the big drop in the unemployment rate is not a positive since it was due to a big decline in the ‘labor force participation rate’, as another large portion of unemployed workers stopped looking for work.

One result of the report that is not debatable is that it creates a problem for the just confirmed new chair of the Federal Reserve.

It had looked like Ben Bernanke had brilliantly prepared an easy transition period for Janet Yellen.

The Fed’s two main concerns, the jobs picture and inflation, were cooperating, jobs in a recent resurgence, inflation remaining benign. Additional positive reports encouraged the Fed to take a chance that the anemic economic recovery was launching into significant growth. As his final act as Fed Chairman, Ben Bernanke announced the nervously awaited tapering back of the Fed’s five years of massive QE stimulus.

Markets accepted the decision as a positive, as the Fed’s confirmation that the economy is indeed getting back on a fast track.

It also seemed to pave the way for Janet Yellen to enjoy a lengthy honeymoon period, needing only to implement the decision already made by the Bernanke Fed to reduce the stimulus by $10 billion a month into the summer.

The stock market loved the expectation of clear-sailing economic conditions, and no surprises from the Fed at least in the first half of 2014, while safe havens like gold and bonds remained out of favor, no longer seen as needed hedges.

The dismal jobs report rained on that benign clear-sailing scenario by raising a serious question.

Was it perhaps confirming recent warnings from the housing industry in the form of plunging mortgage applications, and from the auto industry in the form of significantly slowed December auto sales, that the economy may still be on shaky ground?

The report will force the Yellen Fed to at least consider that possibility, and perhaps slow the tapering process, which Bernanke had indicated it would do if ongoing economic reports disappointed sufficiently.

Market reactions to the report have been interesting.

The safe havens of bonds and gold have been surging higher, up 1.2% and 1.5% respectively. European stock markets rallied nicely after the report, the Europe Dow closing up 1.2%.

Emerging markets are also surging, up more than 1.5%, hopeful the report will force the Fed to taper the global liquidity it is providing even more slowly.

Meanwhile, the U.S. stock market, which was sure it knew what was going on in the jobs picture and the economy, seems not sure how to react.

The report has brought a degree of uncertainty back into the picture, with a return to watching the Fed, with its new chair Janet Yellen, for hints of what it is thinking. Perhaps not a good time for that just as the 4th quarter earnings reporting period begins, adding its own uncertainties.

It does play into my expectation that favorable seasonality and the support of the Fed will keep the market positive until April or May, but with the potential for a short-term correction first to alleviate the short-term overbought conditions and cool off the extreme bullish investor sentiment.

In the interest of full disclosure, I and my subscribers have substantial positions in the U.S. market via the SPDR DJIA etf, (DIA), as well as in emerging markets via the VanGuard Emerging Markets etf (VWO), and the iShares Mexico etf (EWW).

Sy Harding is president of Asset Management Research Corp., and editor of the free market blog Street Smart Post.

© 2013 Copyright Sy Harding- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Sy Harding Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in