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Instant View: Job growth strong again in February

(Reuters) - Employment grew solidly for a third straight month in February, a sign the economic recovery was broadening and in less need of further monetary stimulus from the Federal Reserve.

GRAPHIC: http://link.reuters.com/dan96s

KEY POINTS:

* Employers added 227,000 jobs to their payrolls last month, the Labor Department said on Friday, while the unemployment rate held at a three-year low of 8.3 percent.

* It marked the first time since early 2011 that payrolls have grown by more than 200,000 for three months in a row - bolstering President Barack Obama's chances for re-election.

* The economy created 61,000 more jobs in December and January than previously thought, and the jobless rate held steady even as more people returned to the labor force.

COMMENTS:

ALAN LEVENSON, CHIEF ECONOMIST, T. ROWE PRICE, BALTIMORE, MARYLAND:

"This is viewed as a stronger number than expected... The pace of job growth we've seen in the last six months is steadier and at a higher level than we saw a year ago.

"It continues the trend of the last few months, but the comparison I've been making is between this year and last year. Maybe we're starting a new trend, but I've seen this movie before. Just a year ago we had some strong employment gains at the turn of the year, then a pullback in the spring.

"I don't know when you sound the all-clear. I would say the other labor market data are firmer than they were a year ago and the average weekly hours are higher than they were a year ago, suggesting that there's less scope for adding labor input by extending work weeks and more need to build jobs.

"It's tempting to lean toward the notion we're ramping up to faster job growth and staying there. But again, just looking at a chart of job growth in the second half of 2010 and into the early months of last year, and then seeing how we dropped off very sharply in the spring...

"The bottom line to me is I think the economy is on firmer footing than it was a year ago."

CARY LEAHEY, MANAGING DIRECTOR AND SENIOR ECONOMIST, DECISION ECONOMICS, NEW YORK:

"It's obviously a very good report. When you look at all the facets of it, they all look okay to very good. In order of importance to the investment community, you had a very solid gains in payrolls. You also got significant upward revision so now you have achieved the goal of having three straight months of 200,000+ job gains.

"The distribution of jobs looks pretty good with a good-sized increase in manufacturing within the goods sector. In the service sector, there might be a little disappointment about retail jobs, but you had a very strong increase in business services and temporary help was quite strong.

"The rest of the report is good, but not quite as good. The length of the average workweek did not rise. However, the manufacturing workweek increased. That suggests a good-sized increase in industrial production when that report is released later this month.

"The only weak number was average hourly earnings which rose only 0.1 percent. Once again, wages have not picked up from the 2 percent annualized pace of growth we have had for some time.

"The household survey revealed an unemployment rate which was effectively unchanged at 8.3 percent. But you had another solid gain in employment and the labor force. That shows the gains in the last couple of months are solidifying confidence that the unemployment rate will at least remain where it is and not rise.

"One reason the unemployment rate fell before was the fact that labor force growth was weak. That gave you a lower unemployment rate than you would have had otherwise. It's already lower than most people thought it would be by the end of this year.

"If you throw out the unemployment rate and look at the employment to population ratio you basically have a bedrock measure of the labor market which has not improved much at all in this recovery. So that's an important point. The ratio of employment to population was 58.5 percent in December 2010, little changed from 58.3 two years ago. Federal Reserve Chairman Ben Bernanke quite correctly says by that standard, the labor market is still very weak. And the augmented unemployment rate measure can take unemployment up as high as 16 percent. So that points to a worse labor market than the 8.3 percent unemployment rate would imply."

PETER JANKOVSKIS, CO-CHIEF INVESTMENT OFFICER, OAKBROOK INVESTMENTS, LISLE, ILLINOIS:

"The report looked pretty good. It beat on expectations and the revisions make it a strong report. It was strong enough that people have a feeling the U.S. economy will weather the (Greek) situation regardless if CDS are triggered or not.

"I'm expecting the (equity) market to be flat to moderately up on the day."

ERIK DAVIDSON, DEPUTY CHIEF INVESTMENT OFFICER, WELLS FARGO PRIVATE BANK, SAN FRANCISCO:

"Obviously it is within expectations. These are the types of numbers that six months ago we would have been thrilled to get and now it's right around expectations, which is indicative of things getting better or at the very least, getting less worse, so that is a good thing. We've got plus-227,000, the private numbers were exciting to see. The revisions of December and January were exciting to see as well. The unemployment rate staying at 8.3 percent against the backdrop of the labor force participation rate increasing - this is nothing to pop champagne corks over but it is definitely indicates the economy is going in the right direction."

GENE MCGILLIAN, ANALYST, TRADITION ENERGY, STAMFORD, CONNECTICUT

"The jobs report was better than expected, but the oil markets appear not to be reacting strongly because the data may have already been factored in due to positive forecasts. Oil investors are also a little bit cautious because the dollar is up and that is deterring some 'risk-on' trades. The U.S. crude oil market may stall here, consolidate and stay in the $105-$109 a barrel area before other fundamental or macro economic developments brakes that range."

SCOTT WREN, SENIOR EQUITY STRATEGIST, WELLS FARGO ADVISORS, ST. LOUIS, MISSOURI:

"This number is line with our belief that we are going to see slow improvement in the labor market. We expect the unemployment rate to be at 8.0 percent at the end of the year, and that is still likely going to happen.

"Wages are still going nowhere and real wages are down. Still, this is supportive of a labor market that is slowly improving. We just have sit back because this will take a little time.

"I don't think this number is big enough to drive the S&P 500 through the 1370-1380 level. I don't expect a big up-day on this. The market and most investors are convinced that slow improvement will be the story in the labor market.

"I still think that the Fed could still easily implement QE3. The first-quarter GDP is going to be terrible after last quarter's big inventory build-up. If the unemployment rate is going to stay above 8.0 percent, the Fed is not going to do nothing."

RUSSELL PRICE, SENIOR ECONOMIST, AMERIPRISE FINANCIAL, DETROIT:

"It shows the labor market is on sound footing and is continuing to grow (and) I think we should be able to expect further growth from here.

"The vast matrix of data when looking at the labor market is very supportive of the idea that the job market is finally improving and that this time the improvement should be sustainable.

"But we've been here twice before in this recovery. The other two times we've failed primarily because of concerns about the European sovereign debt.

"Now that the threat from that situation has subsided significantly, I don't think the momentum we're experiencing in employment will be offset any time soon."

GARY THAYER, CHIEF MACRO STRATEGIST, WELLS FARGO ADVISORS, ST. LOUIS, MISSOURI:

"The numbers were good. They show the labor market is indeed showing signs of improvement. We had good job growth in the private sector and relatively small losses in the government sector. Overall, it looks like the economy is starting the year with some positive news for consumers and households. We had upward revisions to both the December and January numbers. The trend is toward better jobs data with companies showing more conviction that the economy is final gaining strength. The unemployment rate held at 8.3 percent but we think that will trend downward. Labor force participation rose a little bit."

ADAM BUTTON, CURRENCY ANALYST AT FOREXLIVE IN MONTREAL:

"This number confirms that U.S. employment continues on an upward trajectory, and it adds clout to those who are saying that QE3 is not the right option at this time. That said, there is some sentiment in the market that the unseasonably warm weather in February has skewed data across the board. We're seeing some U.S. dollar strength, and in stocks some further optimism about the economy, though that could be tempered by skepticism about weather-related effects."

STEWART HALL, SENIOR FX STRATEGIST, RBC CAPITAL MARKETS, TORONTO:

"Good numbers on both overall and private payrolls, and the icing on the cake are the fairly sizable upward revisions. Household job growth is still at relatively healthy levels and the climb in the participation rate is encouraging. It puts a floor under the unemployment rate but it's good to see people coming back into the workforce. For the market, it's still a bit of a Goldilocks scenario - the jobs number points to recovery but it's not so strong that it necessarily scotches quantitative easing, as you still can't characterize this job market as normal by any means."

CRAIG DISMUKE, CHIEF ECONOMIC STRATEGIST, VINING SPARKS, MEMPHIS, TENNESSEE:

"This is a healthy number. It confirms that the labor market is gradually improving. I also liked the revisions. All in all, it's really a positive report.

"The participation rate rose 0.2 percent which is the biggest monthly increase in two years. That's another positive sign. But there are still fundamental weakness in the labor market. Still the jobs market is showing steady improvement.

"It is a good enough number that you will see this would give some strength in stocks and some weakness in bonds.

"The last three months in payrolls in combination have likely delayed the Fed's implementation of QE3."

OMER ESINER, CHIEF MARKET ANALYST, COMMONWEALTH FOREIGN EXCHANGE WASHINGTON, D.C.

"It looks like a solid number pretty much across the board. We got a better-than-consensus reading for the headline number and there were some whisper numbers that were well below the 200,000 mark, so that's even better news than the better-than-expected number might suggest. I think we'll begin to spark debate about the Fed exiting its ultra-accommodative policy stance sooner than expected. I think if this trend continues then clearly there'll be a translation of good economic news to the outlook for Fed policy. I think that's going to be dollar supportive."

SEAN INCREMONA, ECONOMIST, 4CAST LTD, NEW YORK:

"This continues to show that job growth is going at an encouraging pace. Upward revisions to the previous month and a solid February keeps that positive sentiment alive. I don't really think this is a game-changing figure in itself, I think we are still in a moderate recovery and that we can continue job gains around this level, but it may be difficult to continue to gather momentum."

VIMOMBI NSHOM, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS:

"The employment picture in February was just as encouraging as January's surprise, with 227k jobs added to the economy in February. While the payrolls measure beat market expectations which thought payroll growth would slow to 210k, an unchanged unemployment rate of 8.3% in February matches forecasts predicting that entrants to the labor force would limit the percentage of employed, and thus hold the unemployment rate for the second month. Payrolls have risen by over 200k for the third straight month, making room for more analyses that the economic recovery is about to perform on its own (without government support) as more jobs bring about more demand and disposable income to perpetuate its own growth.

"Revisions added an additional 61k jobs to the labor market as January had 284k jobs(originally 243k) and December was revised up from 203k to 223k jobs. January's private payroll growth (now 285k from 257k)essentially represents January's labor market as government job losses were revised down to a decline of 1k from 14k. January services account for majority of the revision (from 149k to 202k) with nearly every industry revised higher, especially healthcare (from 29.7k to 43k), temp help (up 12k to 32.1k), and retail (up to 26.1k from 10.5k)."

MARKET REACTION:

STOCKS: U.S. stock index futures rallied on the news

BONDS: U.S. bond prices were steady at lower levels

FOREX: The dollar hit session highs against the euro and yen

(Americas Economics and Markets Desk; +1-646 223-6300)

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