INSIGHTS

On February 03, 2012

Labor Report Shows Strong Undercurrents

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The strong labor report this morning appeared to be stronger than at first glance.  To summarize, non-farm payrolls increased 243,000 for the month of January, well above the expected 140,000.  The change in private payrolls increased 257,000 over the expected 160,000 while the 50,000 increase in manufacturing payrolls was well above the 12,000 expected.  The unemployment rate dropped to 8.30%.


On the surface, the results are very strong.  However, a more granular look revealed some strong undercurrents.

• The revised numbers of last month’s release showed increases.  The market has become accustomed to the revised numbers coming in on the negative side, especially when initially strong releases of current numbers are the case.


• The average hours worked weekly showed an increase as well to 34.5 hours.  This is significant in that we have been making the case that employers are pushing existing employees for more productivity versus hiring in order to be more flexible with swings in the economy and new orders.


• To further affirm this trait, consider what has happened in the overtime hours in both manufacturing and non-durable goods (service) sector.

Both are now above their long-term average of 3.8 hours weekly.


Though we clearly have a ways to go, the trend seems to be picking up some steam and we reiterate that the low expectations by most economists and strategists lead to a high potential of outperformance versus underperformance.


 

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