Analysis: January 2012 BLS Jobs Report

The US unemployment rate ticked up to 7.9% (from 7.8%); the broader underutilization rate held steady at 14.4%.

• According to BLS estimates, +157k jobs were added in January, slightly lower than consensus estimates of a +166k increase; November and December payrolls were revised upwards by +127k…subsequently, the US economy added an average of +181k jobs a month in 2012 (not too far off the +200k threshold required to keep up with population growth). 

• The total number of unemployed (12.3M) and long-term unemployed - those out of work for 6+ months - remained steady at 38.1% (4.7M).

• Looking ahead (and now that we have a brief respite from Congress' game of financial/Russian roulette), the labor market may be poised to improve even more as the housing recovery finds firmer footing and consumers remain resilient (albeit not as confident). 

Housing's trickle effect?

• The improving housing market (e.g., 5.5% YoY gains in home prices in November) is having positive impacts upstream (construction (+28k; +300k over the last two years)) and downstream with several consumer-sensitive sectors continuing to benefit (retail (+33k), leisure and hospitality (+23k)).

• Meanwhile, several stalwarts of the labor market continued to add jobs:  professional and business services (+25k), health care (+23k).

• Sectors experiencing payroll contraction included:  transportation and warehousing (-14k; although much of this was due to the post holiday blues) and government (-9k; we all know the story here). 

What’s in store? Key watch items…

On the bearish side:

• China.  While the good news is that the country's full year GDP came in at 7.8% and is expected to slightly improve in 2014, the not-so-good news is that a sharp wedge is being driven between China's haves and have-nots.  Based on the Gini coefficient, a statistic that measures a country's income inequality, China's was 0.47 in 2012 (which is not too far off the US':  0.48; Note:  A coefficient of 1 indicates perfect inequality…which is bad).  This highlights the growing disparity between its upper and lower classes.  While Beijing has taken significant steps to shift China's economy from one reliant on exports to a more domestic consumption model, this rapidly increasing divide amongst its consumers could impede the country's long-term growth plans.  Of course, this would have a "butterfly effect" on other countries and companies who have also made big bets on China as a growth driver. 

On the bullish side:

• EU confidence.  While many European leaders and analysts have prognosticated an end to the Euro Zone debt crisis, recent evidence is providing proof that their (once far-fetched) claims might not be too far off.  Consider the following:  According to the European Central Bank, it will be receiving 137B euros (or 1/4 of the total amount loaned in 2011) from 278 previously distressed banks…two years before their loan repayments are due.  This is significant because it provides the clearest indication yet of financial institutions' rapid return to health and removes a major barrier to the gradual recovery of the bloc's economy (and global economy) which is dependent on the health of its banks.