Jobs Report Disappoints as Wage Inflation Decelerates

 

Today’s payroll report was modestly disappointing. December payroll growth of 145K fell short of market consensus of 160K. Weakness was evident in manufacturing payrolls which declined 12K last month. Oct and Nov payroll figures were also revised down by 14K. Jobless rate held steady at a 51-year low of 3.5%, but wage growth decelerated to 2.9% y/y pace versus 3.1% y/y in Nov. On positive note, the underemployment rate (U-6) dropped to a cycle low of 5.7%, indicating that discouraged workers are continuing to enter the labor force. In short, nothing here to dissuade Fed officials from their view expressed in last month’s FOMC minutes that “the current stance of monetary policy as likely to remain appropriate for a time.”

 

 

Downed airliner adds new wrinkle to US-Iran tensions. News that a downed Boeing 737-800 was struck by an Iranian antiaircraft missile, and did not crash as the result of a malfunction was not enough to derail yet another record day for US equities. While the 10-year yield fell marginally to 1.86%, the S&P 500 shrugged off the latest Iran development to climb 0.66% and notch yet another record high.

 

 

Day ahead. The final version of the November wholesale inventories was published this morning. Inventories fell 0.1% in November from October instead of unchanged as previously reported. The bullish figure is a component of GDP and can be an indicator of the current economic outlook. At 1:00 ET, the Baker Hughes North American Rig Count data will come out. The data tracks changed in the number of active operating oil and gas rigs. Investors will pay special attention to these figures given the geopolitical tensions between Iran and the US.