What will Yellen say about Jan Jobs Report?

Given recent concerns about the economy loosing steam and market gyrations, there was even more attention than usual on the January jobs report. Bottom line: it was weak on the job creation side – just 113,000 jobs added. However, the unemployment rate inched down to 6.6 percent, the lowest level since 2008, and this time, the rate went down for the right reason – more people entered the workforce and a bunch of them actually got jobs. Before getting too freaked out about the lousy job creation, there could be a silver lining. Just like the December report was explained by bad weather, there could be distortions in January as well. The Bureau of Labor Statistics made annual statistical revisions in this report and according to Ian Shepherdson of Pantheon Macroeconomics via the NYT, “Had last year’s January seasonal factor been used this year, private payrolls would have risen by 265,000.” Additionally, the monthly data is volatile, with a sampling error of 90,000, so it’s hard to hang your hat on any particular number.

Not buying it? Time will tell whether the economy has downshifted or not, but there were some interesting -- and potentially encouraging -- components buried in this report.

• BLS annual revisions added 136,000 jobs last year, bringing the 2013 total to 2.322 million, or 193,500 jobs per month, up from 182,750 in 2012.
• The broad unemployment rate fell to 12.7 percent, down from 15.4 percent a year ago. This measure is often seen as an important way to gauge the overall labor market, because it includes the official unemployment rate, plus marginally attached workers (those who are neither working nor looking for work, but want a job and have looked for work recently); and people who are employed part time for economic reasons.
• The number of long-term unemployed (those out of work for more than six months) fell to a still-too-high 3.646 million, but the ranks of the long-term unemployed have dropped by 1.1 million from last year.
• Employment is now just 0.6 percent, or 866,000 below the pre-recession peak.

Perhaps newly minted Fed Chair Janet Yellen will point to these positives, when she provides her semi-annual testimony before Congress this week. In fact, many have pondered whether the recent spate of weak data might prompt the Fed to slow down its plan to reduce bond purchases. Most observers expect Yellen & Co to stick to the articulated game plan to reduce bond buying, unless the data deteriorate dramatically in the next couple of months. Economists contend that there is no reason why the recovery should suddenly collapse. Overall, most believe that economic growth should remain solid.

What is less clear is how Yellen plans to address the falling unemployment rate. In Dec 2012, Bernanke made a bit of a boo-boo, by invoking 6.5 percent as a magic unemployment level at which the Fed might start to increase short-term interest rates. But at the last FOMC meeting, the central bankers said that rates are likely to remain at zero “well past the time the unemployment rate declines below 6.5 percent.” That buys Yellen a little breathing room, but if lawmakers want to make news, one of them should ask, “What other measures of employment are you using to measure improvement in the labor market.”

MARKETS: Gains on Thursday and Friday saved a volatile week.

• DJIA: 15,794, up 0.6% on week, down 4.7% YTD
• S&P 500: 1797, up 0.8% on week, down 2.8% YTD
• NASDAQ: 4125, up 0.5% on week, down 1.2% YTD
• 10-Year Treasury yield: 2.68% (from 2.66% a week ago)
• Feb Crude Oil: $99.88, up 2.5% on week
• April Gold: 1262.90, up 1.9% on week
• AAA Nat'l average price for gallon of regular Gas: $3.27 (from $3.57 a year ago)

THE WEEK AHEAD: The National Retail Federation says that 54 percent of Americans will celebrate with their loved ones this year, down from 60 percent last year. The average person plans to spend nearly $134 dollars on candy, cards, gifts, dinner and more, up slightly from $131 last year. Total spending is expected to reach $17.3 billion dollars.

Mon 2/10:

Tues 2/11:

CVS Caremark

7:30 NFIB Small Business Optimism Index

8:30 Fed Chair Janet Yellen’s prepared semiannual monetary policy report for House Fin Services on the released…testimony begins at 10ET)

10:00 JOLTS

10:00 Wholesale Trade

Weds 2/12:

Cisco, MetLife

Thurs 2/13:

AIG, Kraft, PepsiCo

Chinese inflation data

8:30 Weekly Jobless Claims

8:30 Retail Sales

10:00 Business Inventories

10:30 Yellen appears before the Senate Banking Committee

Fri 2/14:

8:30 Import/Export Prices

9:15 Industrial Production

9:55 Consumer Sentiment

Sat 2/15:

Deadline for uninsured to enroll in the ACA Marketplace for March 1 coverage