The January employment report, released this morning, must have big grins on the faces of President Barack Obama and his campaign staff. And despite the negative political implications (of helping Obama’s reelection chances), I still can’t find myself rooting against good economic news. The key is that this is happening despite, not because of, Obama’s policies.
The month-over-month gain in non-farm payrolls came in at 243,000, far exceeding the highest estimate in Bloomberg’s survey of economists, which was 189,000. Private sector payrolls came in at 257,000, again far above estimates, and showing the additional good news that government head counts are shrinking.
The unemployment rate was reported at 8.3%, matching the lowest of the estimates. Average workweek length and average hourly earnings were also very strong.
The political issue here, if this sort of economic trend were to continue, is how Mitt Romney will make his case, which is primarily an economic one, if the economy seems to be on a solid recovery track. I do not believe this pace of improvement is sustainable. Nevertheless, the argument that “this is the weakest recovery in modern American history” is somewhat too subtle for the average voter to understand.
The stock market is looking much stronger prior to Friday’s open, though one has to wonder whether some of this good news was already “baked in,” given the rally the market had earlier in the week. I would not be surprised to see modest profit-taking by the end of the day. That said, I think plenty of people will be caught short here and if the market is still near its highs in the last 15 minutes, I think they’ll take it higher as the shorts are forced to cover going into the weekend.
Government bond and note years are up modestly, and markets have raised their bets on a Fed rate hike by the end of 2013 by about 25%, to a 100% chance of the Fed moving from a 0% target to a 0.25% target. If anything, I think this may still represent lower interest rates than we’ll see if the economy gains traction.
There are no two ways about it, at least from an economic point of view: This was a great number, the best in years, and I’m very glad more Americans are finding work. I just hope they don’t credit President Obama.