Jan Jobs: A Good Start to 2015

The economy added 257,000 jobs in January, slightly ahead of expectations; and the previous two months were revised higher, producing an additional 147,000 positions than the government previously reported. The economy has created more than a million new jobs in the last three months alone. That's the strongest pace of job growth we've seen since 1997. The unemployment rate edged up to 5.7 percent, but did so for the right reason, as more people entered the labor force in search of work. Yes, the participation rate, which tallies the share of Americans who are employed or are actively seeking employment, is still low—just 62.9 percent.

Before the recession started in late 2007, 66 percent of the working age population either had a job or was looking for one. Economists estimate about half of the drop is attributed to baby boomers retiring and the other half is likely due to the severity of the recession. Let’s hope the small 0.2 percent increase is the beginning of a more positive trend.

Perhaps the best part of the report was the nascent sign that American workers could start to earn more money in 2015. Average hourly wages jumped by 0.5 percent in January, the best month over month increase since November 2008. The 12-month increase at 2.2 percent, which is close to a post-recession high. While the gain still lags the 3 to 3.5 percent raises that employees usually earn during recoveries, with inflation running low, even the small increase could help Americans feel more financial secure.

Of course economists are hopeful that with that with their new-found dough, Americans will go on a spending spree and spur additional economic growth. The data have been mixed on that front, though. Although consumer spending jumped by 4.3 percent in the final three months of last year, it looks like it slowed down in December. This caused some concern among analysts, who are worried that consumers were not willing to (gasp!) spend freely.

If I may don my CFP® cap for a moment, I don’t think it’s the worst thing in the world if more Americans were inclined to save, especially after the painful lessons of the recession. The trade-off between the economic recovery suffering a bit at the expense of households strengthening their balance sheets would seem to be a good one over the long term. Time will tell whether or not people will return to the great American pastime of spending, but for now, wage increases should improve both consumers and the economy this year.

Meanwhile, there seemed to be a lot of hand wringing over gas prices (finally) rising last week. The Energy Information Administration's weekly survey showed the U.S. average regular retail gasoline price increased for the first time in 18 weeks. Wait, wasn’t the massive drop in oil and gas prices a sign that the global economy was headed into the abyss? Not so fast, according to Capital Economics, whose analysts say “The recent pick-up in oil prices has the potential to develop into a Goldilocks’ scenario: prices high enough to keep most oil producers in business, but low enough to provide a substantial boost to global economic activity.”

Finally, there were two stories about identity theft last week and we covered both of them on CBS This Morning: “Anthem Health Insurance Data Breach” and “TurboTax Halts and Resumes Filing of State Returns”. Check out this post to learn “How to Guard Against Identity Theft”

MARKETS:

• DJIA: 17,824, up 3.8% on week, up 0.01% YTD (biggest weekly % gain since Jan 2013)
• S&P 500: 2055, up 3% on week, down 0.2% YTD
• NASDAQ: 4,744 up 2.4% on week, up 0.2% YTD
• Russell 2000: 1205, up 3.4% on week, up 0.1% YTD
• 10-Year Treasury yield: 1.94% (from 1.68% a week ago; largest one-week increase since June 2013)
• March Crude Oil: $51.69, up 7.2% on week, biggest weekly % gain since Feb 2011
• February Gold: $1,234.60, down 3.5% on week
• AAA Nat'l average price for gallon of regular Gas: $2.17 (from $2.05 week ago, $3.27 a year ago)

THE WEEK AHEAD:

Mon 2/9:

Hasbro

Tues 2/10:

Coca-Cola

9:00 NFIB Small Business Optimism Index

10:00 Job Openings and Labor Turnover Survey (JOLTS)

Weds 2/11:

AOL, Cheesecake Factory, Cisco, Panera, Pepsi, Time Warner

Thurs 2/12:

CBS, Kellogg, Kraft, Zynga

8:30 Weekly Jobless Claims

8:30 Retail Sales

10:00 Business Inventories

Fri 2/13:

8:30 Import/Export Prices

10:00 Consumer Sentiment