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Clarksville, TN – The January Employment Report was a mixed bag. Nonfarm payrolls rose by a less-than-expected 113,000 (vs. a median forecast of +185,000), following a subpar 75,000 gain in December.
However, seasonal adjustment and weather effects added uncertainty to the results. Details suggest that the weather may not have been much worse than a normal January, but December weather was more unfavorable.Manufacturing and construction jobs appeared to fall less than they normally would have (resulting in seasonally adjusted gains).
Retail and education payrolls fell, which is consistent with bad weather, while hours declined. The unemployment rate fell to 6.6%, but for once that wasn’t due to a drop in the labor force.
The household survey data showed a jump in the unemployment rates for teenagers and young adults (possibly reflecting seasonal adjustment issues), while the rate for those aged 25-54 fell further (to 5.6%, vs. 6.7% a year ago). Note that unadjusted payrolls fell by 2.87 million in January. Take the adjusted figures with a big grain of salt.
The stock market seemed to be searching for direction, using minor economic data to provide support. None of the economic reports in the last few weeks have altered the overall economic outlook for 2014, nor has any of the information pointed to a shift in monetary policy.
The federal debt ceiling went back into effect on February 7th. Through “extraordinary measures,” Treasury should be able to borrow for a few weeks. Republicans have indicated that this won’t turn into a crisis, but they don’t yet know what they want in exchange for raising the debt limit.
Next week, Fed Chair Janet Yellen will testify on monetary policy before the House Financial Services Committee on Tuesday and before the Senate Banking Committee on Thursday. While Yellen has testified many times as a Federal Reserve official, this will be her first major appearance as Fed chair.
Yellen will present the Fed’s economic outlook. She’s likely to stress that while the tapering of asset purchases is not “on a preset path,” officials expect that conditions will warrant further reductions “in measured steps” in the months ahead.
The expectation is that the Federal Open Market Committee will reduce the monthly rate of asset purchases by $10 billion at each policy meeting. The FOMC could taper quicker or more slowly as conditions warrant, but the bar for that is fairly high.
Consumer Money Rates
Treasury Yield Curve – 02/07/2014
S&P Sector Performance (YTD) – 02/07/2014
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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 February 6th, 2013.
Frazier Allen, WMS, CRPS, Financial Advisor with F&M Bank
Web Site: http://www.raymondjames.com/frazierallen
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