The U.S. economy created jobs at the fastest pace in nine months in January and the unemployment rate dropped to a near three-year low of 8.3 percent, indicating last quarter's growth carried into early 2012.
WILLIAM LARKIN, FIXED INCOME PORTFOLIO MANAGER, CABOT MONEY MANAGEMENT, SALEM, MASSACHUSETTS
That was a surprise. We were way overdue for something like this. Employment operates with a lag and I think what we are seeing is all of this positive economic trend has been slowly grinding into positive territory and this is the employment part of it following behind. If we look at what is going on in the economy, housing is definitely in the bottoming phase in most regions and if you look at the stock market, how strong this year has been, they are all indicators that things are on the right track, and this is another one of those indicators.
Could we be taken off the tracks by some event that occurs either with geopolitical events or with the Europe situation? Certainly. But for now things are looking more positive.
VASSILI SEREBRIAKOV, CURRENCY STRATEGIST, WELLS FARGO BANK, NEW YORK
It's a strong number, a very strong number, I would say. It's consistent with the broad improvement in the U.S. economic data, but I think the extent of strength in today's report is somewhat of a surprise, and this is a good sign for the U.S. employment market and the U.S. economy. It should be supportive of equities markets and the wider risk sentiment. The dollar implications I think are mixed. I think we're going to see commodity currencies still outperforming the dollar on this report with the view that monetary policy remains very accommodative. But the dollar seems to be hesitant against the likes of the euro, it might be more mixed on that front. This probably eases QE3 expectations. There does not appear to be any particular economic urgency for the Fed to step in, so I think that is consistent with our central view of steady Federal Reserve policy through 2012.
GENNADIY GOLDBERG, FIXED INCOME STRATEGIST, 4CAST LTD, NEW YORK
The breakdown appears to be rather solid as the household survey shows the number of employed individuals growing faster than the workforce, suggesting that the drop in the unemployment rate was actually a positive. Manufacturing came as an upside surprise, with leisure and hospitality doing rather well. It is interesting to note that there was no expected unwind in temporary workers however, with anticipations of post-holiday unwinds not panning out. One worrying factor however, is that labor force growth could pick up as discouraged workers re-enter the market, potentially weighing on further unemployment rate declines.
PIERRE ELLIS, SENIOR ECONOMIST, DECISION ECONOMICS, NEW YORK
The report was much better than expected in terms of indicating fundamental strength in the economy, and the strength is in the most important place in terms of contributing to momentum. There was a strong increase in private sector employment, widely spread. The expected demerit from the big boost in messenger/courier jobs in December did not appear. The combination of December and January shows a big jump in the usage of labor hours, signifying real growth in the economy. Income growth is moving up almost accordingly, which means an increase in cash flow to consumers.
LINDSEY PIEGZA, ECONOMIST, FTN FINANCIAL, NEW YORK
It was a better-than-expected report, the strongest report that we've seen in quite some time. The big question is -- here's the thing: the reason we're seeing the unemployment rate drop is because more and more people are dropping out of the labor force. I know the market wants to rally on this number but remember we need a minimum of 250,000 just to cover demographic change. So we're almost at the place where we need to be to reabsorb the nine million people who lost their jobs during the Great Recession. This pushes the bar even higher for payrolls for the rest of this year.
Given that the bar is so low we have to take this in the context that it's still not good enough.
BRIAN DOLAN, CHIEF MARKET STRATEGIST, FOREX.COM, BEDMINSTER, NEW JERSEY
I was not looking for anything like this. It's certainly supportive of the U.S. recovery and suggests that momentum is gathering pace. From a trading standpoint, it's positive for risk, but it also lowers the prospects for QE3, which is dollar positive. That's why the euro, after moving higher, is drifting back now. The possibility of QE3 probably gets pushed back to the second half of the year.
ANDREW WILKINSON, CHIEF ECONOMIC STRATEGIST, MILLER TABAK & CO., NEW YORK
No doubt this is an extremely strong report and nobody will dislike it. The back revisions indicate the economy was stronger than expected. Overall a healthy report. Having said that, this should not change the Fed's view as it is one month's report. Certainly the Fed will welcome it but they remain worried about other areas of the economy, namely housing. This should not change its view on the economy.
MATT MCCORMICK, A MONEY MANAGER AT CINCINNATI-BASED BAHL & GAYNOR INC, WHICH HAS $3.2 BILLION IN ASSETS
All I can say is 'wow.' You've seen optimism start to creep into the market despite the pessimism that's present in everyone's mind. We hope this is sustainable. This is the kind of number people wouldn't have believed until we saw it. Expectations were far under this.
SCOTT BROWN, CHIEF ECONOMIST, RAYMOND JAMES, ST. PETERSBURG, FLORIDA
We are going to see stocks initially rally on this and it's going to be negative for bonds. People should take it with a grain of salt since they are January figures and subject to revisions. We also had some unusually mild weather. Still it's an encouraging report.
CAMILLA SUTTON, CHIEF CURRENCY STRATEGIST AT SCOTIA CAPITAL
Obviously a much stronger than expected release. Most of the revisions are positive as well, so well above where we expected. I think there's still caution. The important part about this release was how it factors into QE3 rather than interest rate decisions...Today's release is a very positive report and will soothe some of the deeper concerns at the Fed. I think increasingly (QE3) is being pushed to the background. I think much of it depends on the housing market.
DAVID SLOAN, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS
January's non-farm payroll with a 243k increase was sharply above a consensus increase of 150k with positive if undramatic back month revisions. The breakdown looks positive almost across the board with manufacturing at +50k particularly impressive. Workweek data was improved, sustaining an upwardly revised December level, though hourly earnings with a 0.2% rise merely met consensus. The unemployment rate saw another significant fall, by 0.2% to 8.3%, when the consensus was for no change, with the fall due to increased employment not losses in the labor force. The broader U-6 measure of labor market slack, after three straight 0.4% plunges, saw only a modest fall of 0.1% to 15.1%, but there can be no doubts over the positive nature of this report. There is only one obvious significant caveat, an unusually mild winter restricting the number of seasonal layoffs, which are always heavy in January. Unadjusted, January payrolls still fell by 2.689 mln.
(Americas Economics and Markets Desk)