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Friday, January 7, 2022

Analysts With Egg On Face -- Jobs Report -- December, 2021

 Before announcement:

  • Consensus: 422,000 jobs added
  • Liesman: could be slightly higher.  
  • U of M, Betsey Stevenson: lots of talking but doesn't say anything; appears to agree with consensus but lots of waffling;
  • Cato Institute, Tyler Goodspeed: agrees with consensus
  • Gabriela Santos, JPM: tick down in unemployment rate by one-tenth; 400,000; strong month for wage growth, 0.4% m/m translating to 0.1% y/y; Fed watching wage inflation closely
  • all agree: Omicrom -- not a big factor for the December, 2021, data
    ten-year Treasury 1.75%

After the announcement:

  • And the result: wow, a huge, huge, miss -- 199,000 jobs added.
  • Stevenson: says this doesn't make sense --
    • one survey: 600,000 folks found jobs (household survey)
    • another survey: only 200,000 jobs added (ADP)
    • what explains the discrepancy? Self-employment, is Stevenson's answer

Dow: turns strong green. Then within minutes, Dow goes negative.

Unemployment: wow, wow, wow -- drops to 3.9% from 4.2% -- this is going to be the headline

Participation rate: unchanged over the month. Tight labor market. Four million jobs short. 

Liesman has it exactly right: "You can look at all the numbers but at the end of the day, all that matters -- the unemployment number." And that decrease from 4.2% to 3.9% in today's report is astounding -- suggests how tight the labor market really is. 

When I was interested in learning about "unemployment" some years ago, bottom line: until goalposts were moved by various political entities, an unemployment rate of 4% was considered "full employment."

BLS numbers: are very slow in getting the numbers -- past revisions suggest it's a "counting problem."

Fifteen minutes after announcement: Dow down 50 points -- market opens in 45 minutes. 

New hour on CNBC: Jim Cramer's take --

  • noted that many folks lost jobs because employers shut down; couldn't stay in business due to Omicron
  • Jay Powell, what will he do? Cramer: all my friends have Omicron; all my buddies have Omicron; everybody has Omicron. We have to wait (on raising rates). Betsy Quick agrees -- fed rate raises -- maybe not so fast.
  • Omicron: "everybody's got it."
  • Cramer: with that, how can Jay Powell 'take action'

Bottom line: based on this report, it's going to be very difficult for the Fed to raise rates in March, just two months from now.

  • "everyone has Omicron"
  • jobs miss was huge
  • vs unemployment rate down to 3.9% driving wage inflation (not transitory)

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