Street Expecting Good U.S. Jobs Report

January 6, 2012

Today is U.S. jobs day, and whisper numbers are conjecturing that non-farm payroll employment may have risen as much as 200K.  This optimism follows yesterday’s strong jobless claims and ADP private employment figures.  There appears to be more room for a reaction to weaker-than-forecast results.

In the meantime, investors have other concerns, mostly but not exclusively out of Europe, to weigh:

  • German industrial orders dived 4.8% in November and were 4.3% lower than a year earlier.  The weakness was spearheaded by a 10.6% plunge in foreign orders for capital goods.  If peripheral Europe falls apart, Germany will not be immune.  Orders in October-November were 1.1% lower than the 3Q average level.
  • Unemployment in the euro area remained sky-high at 10.3% in November.  Such has been 10.0% or more in all but two months since the beginning of 2010.  Youth unemployment in the common currency area climbed 0.3 percentage points to a painful 21.7%.
  • Retail sales volume in Euroland dropped 0.8% in November and was 0.7% weaker in October-November than the 3Q average.  Germany, Spain, France, Portugal, Finland and Belgium all reported weaker retail sales in the latest month.  Collectively, sales fell 2.5% on year.  Non-food sales were 3.0% lower than a year before, a 4.7 percentage point adverse swing from a 1.7% rise between July 2010 and July 2011.
  • Overall economic sentiment in the euro area edged 0.5 points lower to 93.3 in December.  Consumer confidence worsened by 0.7 to minus 21.1.  Service sector sentiment fell 0.5 to minus 2.1.  Sentiment in the retail sector of minus 11.7 was 0.6 points weaker than in November and down 11.5 points since last February.  The construction component fell 0.2 points, while industrial sentiment flat-lined at minus 7.1.
  • Yesterday’s Hungarian bill auctions went very badly.  The prime minister of that country attempted damage control today after the forint hit a record low.
  • Unconfirmed rumors surfaced in Asia about a possible accident at a North Korean nuclear facility. This news sent the won and some Asia stocks lower.
  • Rumors continue to swirl that S&P will downgrade the AAA French sovereign debt rating any day now.
  • Canadian labor statistics, released 90 minutes ahead of the U.S. report, were not stellar.  The Canadian jobless rate rose to 7.5% from 7.4% in November, 7.3% in October and 7.1% in September.  December growth in jobs of 17.5K failed to offset November’s drop of 18.6K.  Between October and December, part-time workers declined by 10.2K, while full-timers went up 9.1K.
  • Oil prices remain elevated above $102 per barrel amid sabre-rattling by Iran’s government in its dispute with Europe.
  • The British Halifax house price index posted a second successive monthly decline of 0.9% in in December.
  • Japan’s government took another forward step toward implementing a sales tax increase.  Such an increase in 1997 sent that economy into recession.
  • Further evidence of Swiss deflation was provided by the December CPI data, showing drops of 0.2% on month and 0.7% on year.

Changes in the dollar have been muted ahead of the U.S. jobs release.  The greenback has eased 0.2% against the kiwi, sterling, and loonie and by 0.1% versus the yen, euro, and Swiss franc.  The Australian dollar is steady, and the yuan is 0.1% softer.

Equities fell by 1.2% in Japan, 1.2% in Hong Kong, 1.1% in South Korea, 0.9% in New Zealand and Indonesia, and 0.8% in Australia and The Philippines.  The Paris Cac, British Ftse, and German Dax are up 0.6%, 0.3%, and 0.1%.

Oil and gold prices firmed overnight by 0.3% and 0.2% to $102.15 per barrel and $1623.00 per ounce.

The yields on German and British 10-year sovereign debt firmed two and three basis points, while the Japanese JGB slid a basis point.

Hungarian PPI inflation accelerated much more than anticipated to 8.0% in November from 7.0% in October.  However, the 12-month increase in Hungarian industrial production of 3.5% exceeded expectations.

Czech industrial output growth also accelerated, rising to a 12-month increase of 5.4% in November from 1.7% in October.  The Czech trade surplus narrowed 29% to CZK 18.4 billion in November.  Minutes from the Czech monetary policy meeting last month showed that the softness of the koruna outweighed darker economic growth prospects, so officials left their key rate unchanged.

Norwegian industrial production rose 1.2% on month but fell 1.2% on year in November.  Retail sales volume in that country edged up 0.2% and was only 0.6% higher than in November 2010.

Danish and Belgian unemployment printed at 4.2% and 7.2% in November.

Euroland’s business climate index rose 0.11 points to minus 0.31 in December but remained 1.78 points weaker than its 2011 high last February.

The JP Morgan composite PMI index of the world economy rebounded 1.6 points in December from November’s 27-month low.

Today is Epiphany Day, observed in some parts of Europe.

A slew of Fed officials will be speaking today:  Rosengren, Raskin, Duke and Dudley.  The leaders of Italy and France, Monti and Sarkozy, are meeting today.  Analyst forecasts of nonfarm payroll jobs growth last month range from 150K to 180K, but whisper numbers in the marketplace go even higher.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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