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Feb
9
2012

Podcast: January 2012 Payroll Report

By Sean P. Simko

January’s non-farm payroll number came in above expectations at 243,000, proving to be a very strong report for the start of the year after consensus estimates called for the addition of 140,000 jobs. Companies are gaining confidence, as reflected in recent labor data, and the encouraging news is being driven by overall growth within most sectors.

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Welcome, my name is Sean Simko. I am Managing Director of SEI Fixed Income Portfolio Management. Today’s commentary focuses on the release of January’s employment data, including the non-farm payroll number and the market’s initial reaction.

January’s non-farm payroll number came in above expectations at 243,000, proving to be a very strong report for the start of the year after consensus estimates called for the addition of 140,000 jobs. The prior day’s release of the ADP National Employment Report® showed an increase of 170,000 jobs, which was below December’s revised gain of 292,000. Private payrolls came in at 257,000 for the month, which was higher than December’s revised gain of 203,000.

Companies are gaining confidence, as reflected in recent labor data, and the encouraging news is being driven by overall growth within most sectors. Average hours worked by individuals employed in factories increased to 41.9 while manufacturing jobs gained by 50,000, and retailing climbed by 11,000. The hospitality industry increased by 44,000 and construction added 21,000 jobs. Temporary help increased by 20,000, which is typically a good sign for future hiring. The only area that saw a reduction in jobs was government, which decreased by 14,000 as local government reduced headcount. Overall, the unemployment rate fell to 8.3%, the lowest level since February 2009.

January's ADP report, which showed a creation of 170,000 jobs, was welcomed by investors and seen as a positive follow-up to December’s report. The data continues to show that the labor market is improving. Weekly jobless claims also showed improving figures, reflecting the ongoing optimism.

The Treasury market held its recent highs after the Federal Open Market Committee extended its horizon for holding rates low through late 2014. However, the sector reversed direction after the release of the employment numbers. The curve steepened, with the two-year yield hovering at 22 basis points and the 10-year yield selling off seven basis points to 1.90%. The 30-year was off two basis points to yield 3.11%.

January's labor data was stronger than expected, painting a positive signal for the U.S. economy. While job creation is trending higher, it needs to accelerate at a faster pace in order to move the unemployment rate lower and sustain rising consumer confidence. We do feel the labor market should continue to improve as we move through the first quarter of 2012.

If you have any questions about this podcast or the financial markets, please contact your SEI representative. Thank you.

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice. This information is for educational purposes only.

There are risks involved with investing, including loss of principal. No mention of particular securities should be construed as a recommendation or considered an offer to sell or a solicitation to buy any securities. SEI Investments Management Corporation or its employees may sometimes hold positions in the securities discussed here. SEI Fixed Income Portfolio Management is a unit of SEI Investments Management Corporation, which serves as the investment advisor.

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