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.
Indices
 | Last | Last Week | YTD return % |
DJIA | 16444.76 | 16441.35 | -0.80% |
NASDAQ | 4156.19 | 4143.07 | -0.49% |
S&P 500 | 1838.13 | 1831.98 | -0.55% |
MSCI EAFE | 1892.69 | 1894.74 | -1.20% |
Russell 2000 | 1158.35 | 1150.72 | -0.45% |
Consumer Money Rates
 | Last | 1-year ago |
Prime Rate | 3.25 | 3.25 |
Fed Funds | 0.08 | 0.27 |
30-year mortgage | 4.62 | 3.40 |
Currencies
 | Last | 1-year ago |
Dollars per British Pound | 1.646 | 1.603 |
Dollars per Euro | 1.358 | 1.307 |
Japanese Yen per Dollar | 104.770 | 87.940 |
Canadian Dollars per Dollar | 1.085 | 0.987 |
Mexican Peso per Dollar | 13.125 | 12.753 |
Commodities
 | Last | 1-year ago |
Crude Oil | 91.66 | 93.10 |
Gold | 1227.76 | 1653.35 |
Bond Rates
 | Last | 1-month ago |
2-year treasury | 0.39 | 0.33 |
10-year treasury | 2.90 | 2.87 |
10-year municipal (TEY) | 4.55 | 4.48 |
Treasury Yield Curve – 01/10/2014
S&P Sector Performance (YTD) – 01/10/2014
Economic Calendar
January 14th |
 — |
Retail Sales (December) |
January 15th |
 — |
Producer Price Index (December) Empire State Manufacturing Index (January) Fed Beige Book |
January 16th |
 — |
Jobless Claims (week ending January 11th) Consumer Price Index (December) Philadelphia Fed Index (January) Homebuilder Sentiment (January) |
January 17th |
 — |
Building Permits, Housing Starts (December) Industrial Production (December) UM Consumer Sentiment (mid-January) |
January 20th |
 — |
MLK, Jr. Holiday (markets closed) |
January 29th |
 — |
FOMC Policy Decision, no press briefing |
Important Disclosures
US government bonds and treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. US government bonds are issued and guaranteed as to the timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the US government.
Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments.
Tax Equiv Muni yields (TEY) assume a 35% tax rate on triple-A rated, tax-exempt insured revenue bonds.
Material prepared by Raymond James for use by its financial advisors.
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.
©2013 Raymond James Financial Services, Inc. member FINRA / SIPC.