Tag Archive | "Payroll Report"

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Weather Sinks Jobs

Weather took the blame for a second consecutive non-farm payroll report as equity investors blinked but quickly recovered leaving the dollar and bond market to shoulder the load on Friday. With projections for about 185,000 new jobs in January, the Labor Department’s final report January card was a dismal 113,000 new jobs gained. Compiled with the disappointing 74,000 net gain in December, the under-200,000 two-month report was initially interpreted as softness in the economy.

However, a strong US consumer credit report turned the market around as investors realized the powerful American consumer seems undeterred. The Federal Reserve announced that total consumer credit in December rose $18.8 billion to $3.1 trillion, the biggest gain since February 2013.  

Analysts had projected in increase of about $12 billion. Meanwhile, revolving credit, which measure credit card growth, climbed by $5 billion in December. Both measures point to an engaged consumer, a definite boost to the economy.

Non-revolving credit increased $13.8 billion in December. This includes auto loans and government initiated student loans. Non-revolving credit only expanded by $465 million in November.

A New Course For Yellen?

Speculation immediately arose concerning a new direction by the Federal Reserve. Despite the weak private sector job growth, the nation’s unemployment rate fell 1 percent to 6.6 percent, the lowest rate in five years.

Initially, the Fed set 6.5 percent unemployment as the target to halt bond buying. Most investors and analysts suspect the Fed will fine tune initial goals and tie easing to the broader ranging SEP (Summary of Economic Projections). Investors seemed content that the weak jobs report was a blip in the overall economy, mostly resulting from severe weather that has paralyzed areas of the country in the past two months.

And, February weather has also been difficult. The Fed is scheduled to meet with Janet Yellen at the helm on March 18-19, when revisions to policy could be announced. The February non-farm payroll report will be released before the meeting so Yellen will have three-month composite to review.

Interestingly, the report for February indicated that some 29,000 jobs at all levels of government were lost. The labor participation rate increased to 58 percent, the highest figure since October. In analyzing the unemployment rate reduction, one must not only consider the weather but also the booming number of retirees leaving the workplace as baby boomers move on.

Equities Rally, Dollar Softens

Equities recovered nicely after the disappointing payroll report. The dollar did not fare as well. Investors view the employment glitch as inconsistent with the strong growth in the last quarter of 2013.   

MSCI All-country index – Up 1.09 percent

MSCI Emerging Country Index – Up 0.89 percent

Dow Jones – Up 0.92 percent or 144.4 points to 15,772.99

S&P 500 – Up 1.17 percent or 20.67 points to 1,794.1

NASDAQ – Up 1.56 percent or 63.331 points to 4120.452

Forex pairs

Euro- USD – 1.3633

GPB – USD – 1.649

USD – Yen – 1.0233

USD – CAD – 1.1101

USD – Ruble –  34.7375

US Dollar Index – Down 0.26 percent to 80.694  

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Dollar Gains After Financial Shares Lag

In a volatile day for currency markets, the USD made headway against the euro, yen, GBP, Aussie dollar and Loonie. Helped by more positive economic data, the dollar rebounded during the day after losing ground against the euro and yen in early trading. The dollar halted its assault at $110 vs. the Canadian dollar and posted significant gains aga8inst the Australian dollar.

Factory output and employment gained momentum according to data from the Mid-West Atlantic region and the Philadelphia Federal Reserve Bank. The data suggests stronger than expected employment in the sector in the two regions which include states of Ohio, Pennsylvania, New Jersey and others. The Philadelphia Fed said its business activity index climbed 9.4 points this month from 6.4 percent in December. This marks a significant gain that would help to counter last month’s disappointing non-farm payroll report.

Bolstering the manufacturing data was a report from the US Labor Department showing that state unemployment benefits dipped by about 2,000 claims to a seasonally adjusted rate of 326,000. The combination of these reports will test the accuracy of the Labor Department’s December payroll report.

The data struggled against early morning returns from Goldman Sachs, Citigroup, two companies that were burned by bond trades in the fourth quarter. Goldman stock was a big loser on the day, falling 21 percent at one point. Citigroup shares turned down 4.1 percent and the S&P financial sector index lost 0.7 percent. The news caught investors by surprise in the wake of positive gains posted by JP Morgan Chase, Wells Fargo and Bank of American on Wednesday.

The DOWD was off 76.53 by mid-afternoon. The S&P 500 lost 4.2 po0its to 1,844.18 as the NASDAQ posted slight gains.

Helping the dollar was continues encouraging data regarding inflation. The December Consumer Price Index rose just 0.3 percent after being flat in November.

Bank of England Currency Rate Scandal

 In information released through freedom of information releases, Reuters reported that The Bank of England discussed their processes for setting foreign exchange rates one ear before the manipulation occurred.

Minutes from the April 23, 2012, meeting of the subgroup of the London Foreign Exchange Joint Standing Committee revealed discussions around fixes, the daily setting of benchmark exchange rates. At the meeting, revelations about online chatrooms that discussing advance notice of the daily settings was revealed. The subgroup met at the London offices of BNP Paribas.

The Financial Conduct Authority, the regulatory wing of the Britain, reported that the BoE only became aware of the irregularities months after the April, 2012, meeting. It was action by the US Department of Justice that forced the investigation into the $5.3 trillion-a-day market in October 2013. Large penalties, fines and legal action are expected.

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Markets Non-Plussed By Sour Employment Report

A sour US Labor Department non-farm payroll for December vibrated through global equity markets and gave the dollar reason to pause but the longer-term implications appeared tempered. Analysts had expected 196,000 new jobs created in the month but were rudely snapped to attention by the worst employment report in nearly three years. The economy only added 74,000 jobs in the month. November’s excellent report was revised upwards but ripples of uneasiness persisted.

By all accounts, this was a setback to the economy. Several analysts had gone as far to suggest 300,000 new jobs could be added. Blame was placed on the brutal weather that crossed the country, especially affecting the mid-West and Northeast.

Number of hours worked, a key component of the report, also shifted lower.  Again, blame was placed on the inclement weather. Investors immediately wondered what impact the report would have on the Federal Reserve.

Ironically, the unemployment rate dropped to 6.7 percent, a solid 0.3 points on the data. More than 380,000 left the workforce either through retirement or because they stopped receiving unemployment benefits. This is not the type reduction in unemployment the Federal Reserve had anticipated when it set its 6.5 percent target on halting the stimulus.  

The response to the disappointing news was muted, both in Washington and in equity and Forex markets. Investors seemed puzzled. Several disputed the figures and suggested an upward revision would be forthcoming in the February report. Earlier in the week, the ADP private sector payroll report had indicated significant job increase of more than 175,000.

Equity Markets

As investor debated the upcoming action by the Fed, markets seemed to take the new in stride. After their December announcement of a $10 billion monthly reduction in bond buying, the Fed will meet again on January 28-29 presumably to discuss another tapering addition.

On Wall Street, the Dow lost 7.71 points to 16,437.05 but the S&P and Nasdaq both posted small gains. The S&P 500 gained 4.24 points to 1,842.37, a 0.6 percent gain for the week, while the Nasdaq Composite gained 18.471 to 4,174.665.

The MSCI world index also posted a 0.6 percent gain for the day, marking a 0.4 percent gain for the week.

Mixed trade data from China sent Asian markets mildly lower. China’s December exports increased 4.3 percent, less than expected while exports grew by 8.3 percent, higher than expected.

In the UK, there was concern about a possible oil field accident. British markets were flat and the pound posted gains against the dollar as oil elevated slightly.

Forex Shifts

The dollar lost ground to the GBP, yen and euro but held firm against the Canadian dollar. The dollar index fell to 80.533 (0.46 percent), marking a one-week low.

Against the yen, the dollar fell to 103.83 yen before rebounding to 104.07, off Thursday 105 level.

Mario Draghi again repeated that the ECB would accommodate the banks with lower interest rates but said no action was forthcoming to resist the deflation possibility. The euro closed at 1.3667, up 0.44 percent. The consensus is that Europe’s banks are healthier than six months ago and that the troubled southern tier is recovering. Unemployment figures would seem to dispute that but there are signs that housing and manufacturing are improving.

British sterling closed the week at $1.6480, up 0.1 percent on Friday. The fate of the UK housing market is drawing political debate about the fate of the Help to Buy Programme.

While the dollar showed some weakness on Friday, investors increased their bets on the USD last week by the largest amount in four months. The Commodity Futures Trading Commission announced that $21.1 billion was invested in the currency last week.   

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Bonds Rise, Equities and Dollar Blink

Investors reflected the tension of another week of possible air and missile strikes against Syria and a disappointing US jobs report that conflicted with big strides by the auto industry posted earlier in the week. The American consumer seems to be bucking the odds. The Fed’s unclear policy regarding tapering of its $85 billion per month bond purchasing initiative posed a muddled backdrop for the instability of important legislative actions that should soon be addressed.

The return of the country’s most ineffective and most unpopular Congress is likely to push the nervous investor to the sidelines. The House and Senate are due to not only deal with the Syrian crises but must also address the debt ceiling. How Congress will resolve the nation’s debt will certainly keep nervous investors on the sideline until some resolution is reached. The way this Congress malfunctions makes it hard to say what the outcome of the debt ceiling debate might be.

The Fed’s tapering policy is another unsettling factor. Most investors believe the Fed Reserve will pare spending by between $10 billion and $15 billion per month effective later this month. The Fed will meet on September 17th and 18th. This reduction should add strength to the dollar but may undermine equities.

What is clear is that third quarter employment lacks the strength that analysts has expected. Some analysts cite Obamacare and the congressionally enforced sequestration as contributors to sagging employment. The third quarter was expected to be strong after a lackluster 2nd quarter.

US Labor Department’s Non-Farm Payroll Report

A day after the ADP employment report indicated job growth in the private sector during August of 176,000 jobs, most economists predicted that the non-farm payroll report would surpass those expectations adding about 190,000 jobs. Instead the non-farm payroll report for August indicated gains of 169,000 new workers.

The biggest disappointment came from revisions to June and July reported data. Downward revisions subtracted 74,000 jobs from the two monthly reports. Disappointing new construction statistics caused significant declines in new construction employment. Auto employment also was lower than expected.

The most consistent theme to the non-farm payroll report is the ongoing paring of jobs in the public sector. Local, state and national government employment continues to reflect ongoing trimming. Government employment has shed more than 2 million jobs since the outbreak of the recession.  Yet, in August, a rash of teacher hirings pushed government employment up by 17,000 jobs.

The August non-farm payroll report caused the unemployment rate to fall one-tenth of one point to 7.3 percent, the lowest rate since December 2008. The participation rate struck its lowest mark since August 1978. The participation rate for men hit an all-time low.

After upward revisions, GDP grew 2.5 percent in the second quarter. The third and fourth quarters were expected to be even stronger. Now, it appears economists will be sharpening their pencils for the remained of the year.

The jobs report had elements of gain. August average hourly earnings improved over July. Earnings rose five cents making the gain over the past year a 2.2 percent gain.

The length of the average workweek also improved. The average workweek nudged ahead to 34.5 after hitting a six-month low of 34.4 in July.

Equities, Treasuries and The Dollar

The Dow Jones slipped in late Friday trading. The S&P 500 posted a nominal gain as did the Nasdaq. The MSCI’s World Index, which gauges 45 countries, rose 0.6 percent as the FTSEurofirst 300 also climbed 0.5 percent.

Equity markets fluctuated after mixed messages from Russia’s president Vladimir Putin who said Russia would support Syria if the US struck. Later, Putin clarified his remarks to indicate that Russia would not intervene but would continue to ship weapons to the besieged nation.

As Congress debates the proposed attacks, the decision by the President to send the final decision to Congress appears a heady political maneuver. Polling indicates that the citizens oppose US involvement in any capacity. Congressmen who vote for the strikes may pay a steep political price in the next election.

The USD weakened on Friday. The euro was up 0.4 percent to $1.3168. The dollar was off against the yen, settling at 98.89 yen. The dollar index .DXY settled at 82.1884, down 0.5 percent.

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Employment Disappointment Shakes Markets

Disappointing numbers from the US labor Department’s non-farm payroll report unnerved investors and shook currency markets around the globe. The disappointment came along with some very positive data from June regarding consumer spending and US factory goods.

The payroll data reflects the economy’s inability to sustain growth on its own merits and will surely be viewed with concern by the Federal Reserve. Non-farm payrolls added 162,000 jobs in July, a solid number but well below projected increases of 184,000. However, the unemployment rate fell two-tenths to 7.4 percent, the lowest rate since December 2008. Over the past three months, non-farm payroll growth has averaged about 175,000 new jobs per month.

The Federal Reserve concluded two days of talks on Wednesday without announcing any policy change. Markets received this status with enthusiasm.

Markets reacted quickly to the disappointment. After closing at record highs on Thursday, equities endured modest losses on Friday. The disappointment was apparently negated by the probability that the Federal Reserve will remain committed to its $86 billion per month stimulus through the rest of the year. The S&P 500 index, which crossed the 1700 threshold on Thursday, the DOW and Nasdaq all were down by midday.

Earnings Strong

Another offset to the employment data is the strong performance of US corporations. Of the 375 companies that have reported second quarter earnings, 67.5 percent have surpassed expectations. On Friday, AIG, the giant insurance carrier beleaguered during the recession, announced its first capital return since the 2008 bailout. The company is offering a dividend and stock buyback. Shares jumped 3.4 percent to $48.67.

Linkedin also surpassed expectations, reporting heavier than expected sales. The stock jumped 9.8 percent to $233.88. Over the last four quarters, 55 percent of reporting companies have posted bigger gains than expected.

Other Data On Friday

The Commerce Department’s gauge of core inflation rose 1.2 percent in June. May inflation showed a 1.1 percent rise.

The average work week tuned down to 34.4 hours. Earnings slipped 0.1 percent.  5.7 percent of Americans with jobs could not log enough hours to qualify as full-time jobs. In July, 4.25 million Americans had been unemployed for six months or longer.

Politicians have rejected the President’s infrastructure worm programs and thus have forced the Federal Reserve to be more active than most Americans would like. Additionally, government layoffs continue to hurt the economy as the sequestration passed by Congress will play out during the rest of 2013. As Congress prepares for their August vacation, taxpayers should be asking what Congress will do to get Americans back to work.

Currency Changes

The euro rose 0.4 percent against the USD to $1.3265. The dollar posted gains against the yen to 99.11. The dollar index fell 0.4 percent to 81.994 against a basket of currencies.

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Good Jobs Helps Dollar

Better than expected jobs data from the US Department of Labor sparked US equity markets and stabilized the dollar on Friday. While the non-farm payroll report was encouraging, it hardly appears robust enough to dissuade the Federal Reserve from continuing its current bond buying initiative. US equity markets welcomed the news on two fronts; first that the Fed will most likely be continuing its support and secondly that while growth may be slowing in the second quarter, the hiring indicates the possibility of a strong finish this year.

The private sector added 175,000 non-farm payroll jobs in May, a significant improvement over April’s 149,000 new jobs. There are 4.4 million Americans that have been unemployed for more than six months. This poses a problem for the Fed who believes that many of these workers may not be employable without new skills.

In the last 12 months, the ranks of the long-term unemployed have decreased by about one million workers.  Over the last year, earnings have risen by a modest 2 percent, below expectations.

The manufacturing sector lost 8,000 jobs in May. This sector is troubled by the economic woes in the euro zone. The professional and business services sector experienced surprising growth adding 26,000 temporary jobs. It is hoped many of these positions will convert to full-time employment. As expected, the leisure and hospitality industry responded to seasonal demand showing excellent job growth as did the construction industry. Retail also posted strong gains.

Despite the gains, the jobless rate jumped to 7.6 percent. The rise is attributed to 420,000 persons entering the category. This is a positive development because there are more persons looking for work. The government’s household survey indicated that 63.4 percent of the population was engaged in the labor force.

The number of Americans unemployed for 27 weeks or less edged down to 37.3 percent. The average duration of the unemployed rose to 36.9 weeks. These are important stats the Fed monitors closely.

Terry Sheehan, an economic analyst with Stone & McCarthy Research Associates, explained his take on the data: “We don’t think there is anything decisive in this report to change our outlook for the Fed decision. We think it’s still probable that they will start paring the asset purchase program at the July meeting, but we have more data due in the next couple of weeks, retail sales in particular.

“If the economic data comes in stronger in the coming weeks the FOMC could determine that it’s time to start paring back purchases.

“As to the overall report, we think it’s pretty much steady-as-she-goes for payroll growth. The uptick in the unemployment rate is not particularly concerning. It may be that the late survey period in May meant that some college graduates entered the labor force earlier than usual.”

USD Stabilizes

The dollar settled after the payroll reports was released. The trend lately has been down. On Wednesday, ECG President Mario Draghi announced the ECB would not be increasing its stimulus spending. The news sent the euro to three month highs at $1.3306.  By late afternoon on Friday, the euro was trading at $1.3222.

Against the yen, the dollar has given away much of its gains in the last few weeks. In September 2012, the dollar was 77.12 yen. Earlier in May, the dollar hit 103.73 yen. Late Friday, the dollar bounced back from Thursday’s low to 97.52 yen.

The volatility is clear. This week, the dollar will suffer its worst weekly loss since July 2009.

With the news that Canada added 95,000 new jobs in May, the Canadian loonie gained strength against the dollar to $1.0225. The Canadian jobs report shows the biggest addition of jobs in more than 11 years.

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Disappointing US Data Shakes Markets

Disappointing economic data and a lackluster projection from the ADP National Employment Report sent US equity markets tumbling as the dollar turned sharply down. The data puts a heavy emphasis on the US Department of Labor’s non-farm payroll report for May which is due to be released on Friday.

The Institute of Supply Management’s services index actually edged up in April rising to 53.7, up 0.6 from April. Analysts had projected a reading of 53.5. A reading above 50.0 indicates expansion but the index has turned steadily downward after a high of 56.0 in February of this year.

Most distracting was the news about the new orders component of the report. New orders hit their lowest rating since July of 2012, coming in at 50.1, down from 52.0 in March.

The ISM report data for services was stronger than the data for the important manufacturing sector, which enjoyed strong performance in the first quarter 2013. New factory orders climbed in April but not rapidly enough to overcome the slowdown in March.

Perhaps the most alarming data came from a report detailed a sharp decline in unit labor costs, which fell by 4.3 percent in the first quarter. This is the lowest rating in four years. Analysts projected that the sharp lowering was due to inflated prices paid in the last quarter 2012 that enabled companies to capture end of year tax benefits before the possibility of impending tax increases.

The ADP report only covers the private sector employment. The precursor to the non-farm payroll report showed the private sector added 135,000 jobs in May, which would indicate a non-farm payroll gain of about 165,000. This will be offset by heavy job losses in the public sector, many which job cuts will be the result of the sequestration. The ADP report also lowered the jobs for April from 119,000 to 113,000.

Reaction to the ADP Report

US equity markets have been ginger since Fed Chairman Bernanke’s last appearance before Congress when he hinted that the Federal Reserve’s easing may begin to gradually decrease. The announcement was met with resistance by the market.

Bad jobs numbers would figure to ensure the Federal Reserve remains active with its bond buying initiative, but Wednesday’s news was met with headwinds across all equity markets. By mid- afternoon, the DOW was down more than 195 points. The S&P 500 was down more than 20 points and the NASDAQ shed more than 40 points.

Chief Investment Officer of the Solaris Group in Bedford Hills, New York, Tim Ghriskey, offered an explanation of the sentiment that ran through the markets; “Not great. Bad news is good news in this market lately because it keeps the Fed accommodative, buying bonds and interest rates low. We’ve seen quite a run in rates as well, in other words yields up and prices down. This could be the type of number that maybe begins to reverse that somewhat.

“The employment gain was below expectations and below the run rate of the first quarter. The rest of it actually looks the same, most jobs came from smaller businesses, most came from the service sector. We continue to see expansion of the workforce, job market, but growth has slowed since the beginning of the year and it is pretty much everywhere.”

Most economists project a slowdown in the second quarter 2012 but the market has defied logic. The equity selloff indicates the underlying edginess of investors.

Another negative factor was the sharp increase in mortgage rates, which could dampen enthusiasm for the recovering housing market. 30-year mortgage rates climbed 17 basis points. 30-year mortgage rates increased to a national average of 4.07 percent, the highest rates since April 2012.

Demand for refinancing also suffered a substantial downturn with applications falling off by 15 percent. New loan requests, a measure of the demand for housing, fell 1.6 percent last week.

If the Friday non-farm report is below 165,000 new jobs, the market could react even more strongly.

US Dollar Plunges

The dollar, which has posted consistent gains against the yen over the past six weeks, slumped on Wednesday, losing about 1 percent and falling below the 99 yen mark. The dollar fell as low as 98.99 yen before rallying to 99.12 yen. Two weeks ago the dollar soared above 103 yen for a brief period.

Japan’s equities continued to gain strength as a result of the weakened yen and the dramatic improvement in liquidity afforded by the Bank of Japan’s newest round of easing. Japan’s retail sales continued to post strong gains. On May 23rd, the Nikkei reached a 5.5 year high soaring to a more than 50 percent rise in 2013.

The euro has gained ground since Bernanke’s congressional appearance. The European Central bank appears poised to stimulate growth and ease austerity measures. This condition caused the German 10-year bond to ease 1.512 percent, down from Monday’s 1.534 percent, the highest in three months.

The euro edged above the $13.0 mark and the USAD gave ground against a basket of currencies on Wednesday.  US oil gained $0.79 to $94.09 per barrel.

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Bad Jobs Report Ominous

The President warned us that the sequester would cost jobs and the March non-farm payroll report looks to have ominous signs for the economy, the recovery and the Federal Reserve. Only 98,000 new jobs were created in March, well below the projected 200,000.

The unemployment rate ticked down one percent to 7.6 percent based on 468,000 persons leaving the unemployment lines. These numbers are in sharp contrast to job creation in January and February, where adjustments added another 68,000 new jobs. More importantly the prevailing mood among investors and business persons is pessimistic.

One of the biggest cuts was in retail, which had been showing strong job growth. After several months of surprising gains, retailers trimmed more than 24,000 jobs in March. On the brighter side, construction which rebounded last month, added another 18,000 jobs in March. This comes if the face of brutal weather across the Northeast.

The March employment figures may squash conversation about the Federal Reserve paring down its easing program. Chairman Ben Bernanke is committed to staying with the Fed’s acquisition policy until unemployment dips well below seven percent. There had been optimistic speculation that the Fed would reduce expenditures by the end of the year. That now appears unlikely.

These numbers should not be a great surprise. The payroll tax holiday expired and Congress insisted on implementation of punitive budget cuts that are going to cost jobs. Republicans are likely to take the rap for this newest jobs development and it will be well deserved.

US Markets are poised to turn down as is the USD. The jobless rate is the lowest since December 2008. The percentage of people looking for work or employed shrunk to 63.3 percent, the lowest rate since 1979.

The real question is will Washington do anything about the reversal. After more than 200,000 jobs gained in February, optimistic has cautiously ruled the day. However, the dysfunction in Washington has unnerved investors and business persons who do not know what to expect next. Rather than look to expand, businesses are once again covering their bases and tightening spending and investment.

Meanwhile, the number of Americans filing for new unemployment benefits rose to the highest level in four months in March. Initial claims increased 28,000 in arch, the highest level since November.

These numbers are consistent with what President Obama projected when debating the sequester. Republicans have staunchly resisted any new jobs programs at a time when economists warned the focus should be more attuned to growth than austerity.

It seems March may be a sign of bigger disappointments to come. Although there was one ray or light released by the Commerce Department on Friday. The trade balance shrank further in march, continuing a positive trend.

US equities opened lower and continued to shed recent gains in light of the disappointing report. The euro climbed above $1.30 and the yen rose above 96.5 against the USD in early trading. This jobs report is a real setback to the global economy and to the US. It is especially unnerving to think it could have been prevented.

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US Equities Surge, Euro Gains

Fueled by encouraging news from the Department of Labor and the Commerce Department and the University of Michigan, the Dow Jones moved quickly above the 14,000 mark before retreating just below the benchmark. The S&P 500 gained 12.09 points and the Nasdaq Composite jumped 24.44 points in early morning trading.

The Labor Department produced its January Non-Farm Payroll report indicating that the US added 157,000 jobs in January. For December and November, 127,000 more jobs were created than initially reported. The unemployment rate rose to 7.9 percent, but the market responded positively to the December and November adjustments.

Sectors With Job Growth

  • Construction jobs +28,000
  • Retail +22,000
  • Healthcare +23,000
  • Manufacturing unchanged
  • Government -9,000

The average work week was stable at 34.4 hours per week. Personal income rose by $0.4 in January

The improved construction industry is keenly watched by analysts. Health care added 320,000 jobs in 2012. Manufacturing showed no new jobs in January. More than 2,170,000 jobs were created in 2012. In calendar year 2012, job growth averaged 181,000 per month.

The Institute For Supply Management (ISM) report was also encouraging. The ISM reports that PMI registered 53.1 percent, a significant jump from the 50.2 registered in December’s report. Manufacturing increased for the second consecutive month. New orders increased to 53.3 percent, an unexpected jump of 3.6 percent.

The ISM reports that 13 of the 18 manufacturing industries posted increases in January. The report may identify the surprising dip in GDP in the fourth quarter. Weather disasters, the fiscal cliff and uncertainty in the euro zone have weighed heavily on the economy. However a paring in defense spending may well be the major factor in lowering the GDP.

Housing prices are making some headway but, on the whole, the industry is mired in a deep slump and it is clear that young Americans are not determined to purchases homes.

The Euro Continues Gains

The euro continued its impressive rally rising to 1.3674USD, a level not visited since November 2011. The new close represents a 0.6 percent one-day gain.

Driving the euro was a better than expected Purchasing Managers’ Index. The January report showed more demand than at any time in 2012. Output in Germany was particularly strong.

The euro is still riding a high from the early three-year loan repayments. Despite down days in Spain, Greece and Italy, there is a new confidence in the euro zone. All major indices in the region were up except for the three laggards who registered another day of hard hits

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Step Aside Washington Let The Economy Work

Despite Washington’s dysfunction, the US Labor Department’s Non-Farm Payroll report showed 155,000 jobs were added in December. Additionally, another 15,000 jobs were adjusted to the November total. By all accounts, the figure continued a steady progressive trend.

Based on the antics of a devastatingly dysfunctional 112th Congress, many analysts feared for the worst. Over the last 60 years, the unemployment rate has averaged 6.0 percent. Today, the unemployment rate is 7.8 percent and there are few reasons to think the economy can re-create more prosperous times. The December unemployment rate is one percent less than 12 months ago.

There are many theories about the direction of the US recovery. However, analysts all agree that the dysfunction in Washington may be the nation’s biggest hurdle.  With momentum leaning forward, the economy received no lift from the pitiful resolution of the fiscal cliff. There is not one provision in this divisive piece of legislation that gives the economy direction much less the much needed stability to know where the country is headed. Lacking than a clear direction of financial policy, the government has engulfed the business community with instability. Business leaders have learned very little about what demands a resolution to the debt crisis will make.

The end result of the first leg of the self-imposed fiscal cliff is that business leaders know less about the direction of the solution than before negotiations commenced. Businesses are again forced to hoard their capital in preparation for the next Congressional debacle. It is a sorry state and not one worthy of the world’s largest economy.

In December, average hourly earnings increased by 0.3 percent. Two important sectors that have been gutter-bound since the outset of the recession, construction and manufacturing, reflect progress as new jobs increased in both sectors.

To many observers, new job creation in December is disappointing. To others, it is a miracle that the economy has withstood a government seemingly on a path of self-destruction. Retail sales over the holidays were below expectations. Consumers started the holiday buying season at a good pace but as the fiscal cliff approached, many consumers applied the brakes. Now, facing several more agonizing fiscal negotiations and when the country needs the full power of the American consumer, it becomes difficult to see positive growth and new job creation.

Will the Congress Remove the Shackles?

The politicians will be negotiating the debt ceiling, and the pending portion of the fiscal cliff in upcoming months. If that isn’t enough to dim the economy, consider it a miracle.

On a positive side, automakers have achieved great success in 2012. And, local, state and national payrolls cut 13,000 jobs in December.

What the country needs is a well-considered debt reduction plan. Only the development of such a plan will encourage corporate investment and return consumers to open pocketbooks. The chances for a resounding debt resolution plan are cloudy at best.

Richard Gilhooly, an interest rate strategist for TD Securities, New York, offered a sound observation regarding the current job marketplace. “Private sector payrolls at 168,000 were fairly robust in December and the general view is that the recent numbers were likely depressed by fiscal cliff issues, such that improvement should be seen in coming months.

“The household survey was weaker, with only 28,000 jobs, while 192,000 people entered the labor force, pushing the unemployment rate 0.1% higher. Bonds initially traded higher on the unemployment rate and the idea that QE is pegged to at least 6.5 percent, but the market has traded back to the lows subsequently on what is generally a firm report and likely better ahead.”

Imagine where the economy would be if Washington stopped presenting obstacles to a motivated environment.

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