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Goldilocks Pays a Visit Via the Payrolls Report

Stock MarketsJan 10, 2020 10:08AM ET
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Investing.com - It would be tough for investors to find something to dislike about the December jobs report, despite the miss on the headline number. It had all the hallmarks of a classic Goldilocks report - not too hot or cold.

Job creation did cool off at the end of the year from a very strong November jump, as expected, but the lower-than-expected rise in nonfarm payrolls still showed decent job creation.

For those keeping score, nonfarm payrolls rose by 145,000 last month, compared with expectations for a rise of 164,000 according to economists’ forecasts compiled by Investing.com.

November payroll growth was revised down to 256,000 from 266,000 and Ocober’s payroll riser was revised down to 152,000 from 156,000.

“Two facts that are useful (because each upsets someone's talking point),” University of Michigan Economic Professor Justin Wolfers tweeted. “1. It's stunning that the recovery has continued this long, this strong, and this robustly. 2. The rate of job growth today is pretty much the same as it has been for each of the past eight years.”

Meanwhile average hourly earnings rose less than expected, up 0.1% for December and 2.9% year on year. That indicates that wage inflation is still not much of a concern and certainly won’t fly onto the radar of the Fed.

So, the job market keeps chugging along without any fear of rate hikes, which look like they could be off the table for the entire year, according to recent remarks from Fed officials

Based on fed funds futures, a rate move isn’t likely until December, according to Investing.com’s Fed Rate Monitor Tool.

Mohamed El-Erian, chief economic adviser to Allianz (DE:ALVG), said the report was balanced by a record low in the more comprehensive U6 employment measure to 6.7% and muted wage growth and flat labor participation.

“In my opinion, the overall net effect of this report is unlikely to change consensus views about the prospects for the #economy and Federal Reserve policy,” El-Erian tweeted.

Looking to the market reaction, the S&P 500 opened slightly below the level it was at before the payrolls report. But a Goldilocks number doesn’t guarantee investors won’t lock in some profits after the news.

Goldilocks Pays a Visit Via the Payrolls Report
 

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