Submitted by Gary S. Wagner on Friday, January 10, 2014 - 16:39.
Just as it seemed the dark clouds of recession were blowing out to sea, the December jobs report blew in and socked the U.S. economy into a fog. Only 74,000 jobs were added last month.
What is more disheartening is that because so many individuals have stopped looking for work, the unemployment rate dropped to 6.7%, heading faster toward the target number the Fed has posted time and again. However, rest assured that this is not what the Fed had in mind when they were thinking about a decline in unemployment.
"Weather is clearly playing a role and you don't want to overreact to any one number," said Julia Coronado, chief United States economist at BNP Paribas. Bu the ominous signs go well beyond the brutal weather.
In the group of workers aged 45 to 54, the labor market participation rate dropped 0.4 percentage point to 79.2 percent, the lowest since 1988. For workers 55 and older, the participation rate edged down by only 0.1 percentage point. So, indeed, it is not really exiting Baby Boomers (who are now supposedly retiring at a rate of 10,000 per day), but workers still in their prime earning years, the years when the most money is made in the shortest span of time. It could have seriously detrimental ramifications in the next 20 years.
Overall, the labor force has shrunk by about 550,000 in the last 12 months.
There are mixed interpretations regarding how the labor data will play out in the FOMC meeting at the end of January.
If committee members believe that the stats are outliers, then the Fed might continue to taper. If they believe that something has gone more crucially wrong, they may stop tapping the brake until at least March.
We all saw what the figures did to the prices of precious metals today. Traders seemed to have interpreted the labor report as dovish for Fed QE3 policies.
These sorts of knee-jerk reactions work both ways, though, as we have so often seen in the last year or so.
We have re-entered the land of the short, quick-turnaround trade as we await the gurus on the FOMC to give the opinion that matters most.
As always, wishing you good trading,
Gary S. Wagner - Executive Producer