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Clarksville, TN – The December Employment Report was a mixed bag. Nonfarm payrolls rose a disappointing 74,000 (median forecast: +195,000, although market participants were anticipating an upside surprise following a stronger-than-expected ADP estimate).
The November payroll figure was revised to +241,000 (from +203,000). Manufacturing rose by 9,000. Construction fell by 16,000, with weakness concentrated in nonresidential and in heavy construction and civil engineering (residential rose 6,200).Retail rose by 55,300, while temp-help advanced 40,400. Healthcare fell by 6,000, following an above-average gain in November. Education fell by 13,500.
The unemployment rate fell to 6.7% (from 7.0% in November), reflecting a further drop in labor force participation. Annual benchmark revisions to the household survey data were minor.
The employment/population ratio held steady at 58.6%, the same as a year ago. Note that seasonal adjustment is often tricky in December. The payroll figures will be revised (annual benchmark revisions to the establishment survey data will arrive next month).
The FOMC Minutes from the December 17th-18th policy meeting showed that Fed officials were in general agreement about a cautious initial tapering in the pace of asset purchases. Tapering is not on a set path, but most FOMC members expected to end the asset purchase program in the second half of the year (which would work out to about –$20 billion per quarter).
Officials were worried about an adverse reaction in the financial markets. If financial conditions tighten excessive, the Fed would likely slow the rate of tapering (all else equal).
Next week, the economic calendar will be busy. The focus is expected to be on the retail sales figures, but Wednesday’s Beige Book could reflect an upgrade in the assessment of the economy. Industrial production is expected to be relatively soft.
Consumer Money Rates
Treasury Yield Curve – 01/10/2014
S&P Sector Performance (YTD) – 01/10/2014
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Tax Equiv Muni yields (TEY) assume a 35% tax rate on triple-A rated, tax-exempt insured revenue bonds.
The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business January 9th, 2013.
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