Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

U.S. Jobs Report Rained On New Fed Chair Yellen’s Honeymoon Period

Stock-Markets / Employment Jan 11, 2014 - 08:06 AM GMT

By: Sy_Harding


Once again, the Labor Department’s monthly employment report lived up to its reputation of providing a surprise in one direction or the other.

The economy created only 74,000 new jobs in December compared to the consensus forecast for 200,000.

No one saw that coming, and the bull/bear debates over what it means have begun.

Most economists have it that the plunge in jobs is not a negative since the cold weather in December obviously affected hiring. (Is it not just a bit odd that they were not able to factor that ‘obvious’ weather situation into their forecasts prior to the report?).

Yet in spite of such a substantial drop in new jobs, the report also showed the unemployment rate unexpectedly plunged significantly, from 7.0% to 6.7%, compared to forecasts that it would tick up to 7.1%.

And analysts have it that the big drop in the unemployment rate is not a positive since it was due to a big decline in the ‘labor force participation rate’, as another large portion of unemployed workers stopped looking for work.

One result of the report that is not debatable is that it creates a problem for the just confirmed new chair of the Federal Reserve.

It had looked like Ben Bernanke had brilliantly prepared an easy transition period for Janet Yellen.

The Fed’s two main concerns, the jobs picture and inflation, were cooperating, jobs in a recent resurgence, inflation remaining benign. Additional positive reports encouraged the Fed to take a chance that the anemic economic recovery was launching into significant growth. As his final act as Fed Chairman, Ben Bernanke announced the nervously awaited tapering back of the Fed’s five years of massive QE stimulus.

Markets accepted the decision as a positive, as the Fed’s confirmation that the economy is indeed getting back on a fast track.

It also seemed to pave the way for Janet Yellen to enjoy a lengthy honeymoon period, needing only to implement the decision already made by the Bernanke Fed to reduce the stimulus by $10 billion a month into the summer.

The stock market loved the expectation of clear-sailing economic conditions, and no surprises from the Fed at least in the first half of 2014, while safe havens like gold and bonds remained out of favor, no longer seen as needed hedges.

The dismal jobs report rained on that benign clear-sailing scenario by raising a serious question.

Was it perhaps confirming recent warnings from the housing industry in the form of plunging mortgage applications, and from the auto industry in the form of significantly slowed December auto sales, that the economy may still be on shaky ground?

The report will force the Yellen Fed to at least consider that possibility, and perhaps slow the tapering process, which Bernanke had indicated it would do if ongoing economic reports disappointed sufficiently.

Market reactions to the report have been interesting.

The safe havens of bonds and gold have been surging higher, up 1.2% and 1.5% respectively. European stock markets rallied nicely after the report, the Europe Dow closing up 1.2%.

Emerging markets are also surging, up more than 1.5%, hopeful the report will force the Fed to taper the global liquidity it is providing even more slowly.

Meanwhile, the U.S. stock market, which was sure it knew what was going on in the jobs picture and the economy, seems not sure how to react.

The report has brought a degree of uncertainty back into the picture, with a return to watching the Fed, with its new chair Janet Yellen, for hints of what it is thinking. Perhaps not a good time for that just as the 4th quarter earnings reporting period begins, adding its own uncertainties.

It does play into my expectation that favorable seasonality and the support of the Fed will keep the market positive until April or May, but with the potential for a short-term correction first to alleviate the short-term overbought conditions and cool off the extreme bullish investor sentiment.

In the interest of full disclosure, I and my subscribers have substantial positions in the U.S. market via the SPDR DJIA etf, (DIA), as well as in emerging markets via the VanGuard Emerging Markets etf (VWO), and the iShares Mexico etf (EWW).

Sy Harding is president of Asset Management Research Corp., and editor of the free market blog Street Smart Post.

© 2013 Copyright Sy Harding- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Sy Harding Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in