The US unemployment rate decreased to 8.3% (from 8.5%), marking the fifth consecutive monthly decline; the broader underutilization rate decreased to 15.1% (from 15.2%).
• A net +243k jobs were created in January, well above consensus estimates of +125k.
• The total number of unemployed declined to 12.8M (from 13.1M); long-term unemployed, those out of work for 6+ months, decreased slightly to 5.5M (42.9% of all unemployed).
• When these figures are coupled with the employment-population ratio (which rose +0.3%), one can conclude the rate decrease was largely driven by job creation and not discouraged workers leaving the workforce.
Sustained broad based gains
• Job growth remained widespread: professional and business services (+70k), healthcare (+31k), construction (+21k), retail (+19k) and mining (+10k) were among the sectors experiencing significant job growth. Information (-13k) and financial and insurance (-7.5k) were the laggards.
• Quite interestingly, manufacturing (+50k; +44k in durable goods) and leisure & hospitality (+44k; +33k in food and drinking places) also showed sizable gains…offering further anecdotal evidence of increased consumer demand, sentiment and appetite (pun intended).
• Moderate losses were experienced in the public sector (-14k; -11k at the local level), further underscoring the private sector's prominent role in driving the labor market's recovery (and not government stimulus).
What’s in store? Key watch items…
On the bearish side (aside from the ongoing EU debt crisis and emerging confrontation in Iran):
• Consumer confidence. The Conference Board's gauge of consumer sentiment unexpectedly dropped to 61.1 (vs. consensus estimates of 68.0). While this is still a largely positive figure, continued deterioration may damper consumer demand which accounts for nearly 2/3 of GDP.
• Global growth. The International Monetary Fund cut its 2012 global growth forecast to 3.3% from 4%, citing the EU downturn as the largest barrier.
On the bullish side:
• China. By many accounts, China appears to have engineered a soft landing for its overheating economy. Inflation fell to 4.1% in December, the lowest in 15 months, and real estate investments and housing prices are cooling down (allaying fears of a real estate bubble). These trends may give the Chinese government more impetus to expand its pro-growth policies.
• The Fed. The Fed's decision to keep interest rates near zero until 2014 will continue to aid the recovery by maintaining historically low borrowing costs. Furthermore, it appears US inflation remains in check (for now).
On the neither bearish/bullish side:
• Upcoming election. Sustained improvements in the job market does not bode well for the challenging Republican party. Subsequently, companies must begin considering the longer-term effects of President Obama's policies (e.g., Obamanomics, Obamacare, etc.).
