The U.S. economy added 225,000 jobs last month with employment at construction sites increasing by the most in a year amid milder-than-normal temperatures, data from the Labor Department showed. Economists polled by Reuters had forecast payrolls would rise by 160,000 jobs in January.
The unemployment rate ticked up one-tenth of a percentage point to 3.6%.
KEY POINTS:
*U.S. Jan nonfarm payrolls +225,000 (consensus +160,000) vs Dec +147,000 (prev +145,000), Nov +261,000 (prev +256,000)
*U.S. Jan Labor Force Participation Rate 63.4 Pct Vs Dec 63.2 Pct (Prev 63.2 Pct)
*U.S. Jan Average Hourly Earnings All Private Workers +0.2 Pct (Cons +0.3 Pct) Vs Dec +0.1 Pct (Prev +0.1 Pct) To $28.44 Vs Dec $28.37; Jan Year-On-Year Earnings +3.1 Pct (Cons +3.0 Pct) Vs Dec +3.0 Pct (Prev +2.9 Pct)
MARKET REACTION:
STOCKS: S&P e-mini futures extend losses, last down 0.4%BONDS: 2-year, 10-year Treasury yields edge lower; 10-year yield last at nearly 1.60%FOREX: Dollar index rises, last at 98.6
COMMENTS:
JOSEPH LAVORGNA, AMERICAS CHIEF ECONOMIST, NATIXIS, NEW YORK
“Two things that are important. You got a really big job gain, despite the fact manufacturing is weak. That’s impressive. Again, the economy ex-manufacturing, ex-goods is doing great, which means at some point the most cyclical part of the economy is going to be a positive contributor, it’s going to be a tailwind. It’s not there yet but will be.
“The second, which is almost as important, but less obvious, is labor force participation is trending higher and because it’s still so far below previous cyclical peaks. If that continues to go up, because people are being pulled into the workforce, that means that these big jobs gain that a lot of people have been thinking were going to slow are going to continue. They’re going to continue longer relative to whatever your baseline was, i.e., we’re not running out of people because participation is going up, that’s great. That’s great for everybody."
SAMEER SAMANA, SENIOR GLOBAL MARKET STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE, ST. LOUIS
"The number came in ahead of expectations. The keys points would be that participation continues to tick higher and the unemployment and underemployment rate ticked up but that was probably because of the higher participation. Sometimes in the short term it can take a month or two to digest all those new people. Wages were steady. Weekly hours were steady."
"All in all it was a pretty solid report fairly in line with expectations. Manufacturing remains weak. That continues the trend we've seen. That's not a surprise. If anything, it'll remain weak because of coronavirus. One of the impacts it could have is on global supply chains."
RICK MECKLER, PARTNER, CHERRY LANE INVESTMENTS, NEW VERNON, NEW JERSEY
"The jobs number was better than expected. Where the market is right now, it likes to see an economy that's not too hot and not too cold because a much stronger economy suggests higher interest rates."
"The market has been again reacting to the latest coronavirus news. It sort of rallied with the idea it will be containable for U.S. markets. But there's a lot of news about it having a more severe impact on China than what people envisioned."
"I think investors are convinced that the Fed will do nothing for most of this year. Stronger number with some downward revisions, no it's not enough (for a Fed move). Although it does remind people on some level that a combination of growing deficit and the impact of government spending on pushing the economy forward could have a negative consequence for interest rates down the road. Most people see it as well down the road."
DOUG DUNCAN, CHIEF ECONOMIST, FANNIE MAE, WASHINGTON D.C.
“Bottom line, this is a strong report. The annual benchmarking showed it downward adjusted but not unusual from a historical perspective.”
“From our perspective, we say in our forecast that this is an economy resilient to shocks and the labor report bears that out. The fact that the actuals were well above what the estimates were suggests that the economy continues to be resilient.”
“The Fed will remain on hold, there’s nothing here to change their perspective.”
“The fact that earnings continue to be around 3% or better is good news for workers.”
“The jump up in residential construction, which was 20,000, was the highest since last January. That’s great news for housing supply in a market that is supply constrained.”
JJ KINAHAN, CHIEF MARKET STRATEGIST, TD AMERITRADE, CHICAGO
“Besides the fact it was a blowout number, the one thing I loved about it was the re-entrance into the workforce at 183,000 and them saying it was statistically significant. And the one thing I really don’t like is the manufacturing down two months in a row, that you have to look as something to be a little concerned about. What you really have to start watching going forward is transportation to make sure that kind of remains a wash."
"Coronavirus is still the thing that can derail us and let’s face it, we are playing it day-to-day so we will continue with that game plan I would expect, for at least the next couple of weeks. If we don’t have any major outbreaks you might be able to say all is clear, let’s go worry about something else. The tariff threat has subsided pretty well and that is what we worried about for a year and a half. We always like to worry about something but if ... coronavirus gets solved we are kind of running out of some things to worry about. We’ll find something, because that is everyone’s job.”
BRIAN DAINGERFIELD, HEAD OF G10 FX STRATEGY, US, NATWEST MARKETS, STAMFORD, CONNECTICUT
“For me the focus in FX is the dollar rallied modestly, and then came back. In the context of the data we saw this week we had ISM numbers that were better than expected, and the ADP number in particular was quite strong. I think the market anticipated that this number would be quite good and so the dollar being mixed here might represent the fact that the market expectation might have been higher than the consensus on Bloomberg. The official consensus was 165,000, but after the good data we saw this week I think the markets whisper consensus was probably a bit higher, so that might be reflected in the fact that we haven’t seen major moves, albeit after the initial reaction.”
“This is a good number, it's above the prevailing trend. I think the global economy in January showed signs of improving. The U.S. is showing signs of improving as well. Coronavirus has thrown a lot of uncertainty into whether or not the improvement in the data globally we’ve seen in January can be sustained. But the data generally in January have improved and this week confirmed that the data in the U.S. also saw an improvement in some of the underlying activity data heading into the turn of the year.”
BIPAN RAI, NORTH AMERICAN HEAD OF FX STRATEGY, CIBC CAPITAL MARKETS, TORONTO
"The data was quite robust, with the number of jobs added to the economy, and the fact that we're still growing, but at probably a much more subdued pace than what the market had anticipated. Maybe the gains in the dollar can best be described as tepid. Perhaps the wage miss is what's behind this."
"We can quibble about decimal points, but I think that's what the market is doing. We had some expectations built in that the wage growth number is closer to 0.3%. But everything else looks decent."
(Americas Economics and Markets Desk; +1-646 223-6300)
