The Market Today

Labor Market Starts 2021 on Weak Note

by Craig Dismuke, Dudley Carter


Nonfarm Payrolls Gain Just 49k: The labor market got off to a weaker start than expected in 2021, providing one of the first datapoints this year to bolster the White House’s argument for a larger stimulus plan. The economy added just 49k nonfarm payrolls in January while December’s jobs loss was revised up from -140k to -227k.  Including November, the final two months of the year saw 159k fewer payrolls than initially reported.  By sector, the private economy added just 6k jobs while government added 43k.  Goods-producing jobs were particularly weak with construction losing 3k and manufacturing losing 10k.  Retail shed another 38k jobs and the leisure sector lost another 61k; primarily from food service (-19k), accommodations (-18k), and amusement/gambling (-27k).  On a positive note, education jobs did improve, for a change.  Local education jobs gained 49k, state education jobs increased 36k, and private education jobs increased 34k. The payroll report also included the annual benchmark revision which showed a larger amount of job destruction beginning in March (-310k) but a fractionally smaller amount of job loss in April and May (+216 cumulatively).

Unemployment Rate Drops from 6.7% to 6.3%: In the household report, the unemployment rate dropped from 6.7% to 6.3% as more people reported as employed, fewer people reported as in the labor force, and the annual benchmark revisions removed 476k people from the overall population.  Controlling for the benchmark revisions, the number of employed persons rose 381k while the number of unemployed fell 586k.  As a result, 206k people moved from being in the labor force to out.  Taking into account monthly population growth, a net of 304k more people reported as not in the labor force in January.  The number of permanent job losers in January rose to 3.5 million while those who are unemployed-not-temporarily rose to 4.25 million. On a positive note, those employed part-time for economic reasons declined to 5.95 million.

Bottom line: The pace of job growth slowed more than initially reported at the end of 2020 and has started 2021 weaker than expected.  In addition, those sectors most directly affected by restrictions on mobility continue to be hardest hit.  Going forward, the number of virus cases turned sharply lower mid-January which should turn the tide for those virus-affected sectors.

CORONAVIRUS UPDATE (VS Coronavirus Chartbook – PDF)

A Stimulus Update: House Speaker Pelosi said President Biden’s stimulus proposal meets the needs of Americans still struggling amid the COVID-19 pandemic. A Democratic Senator said she expects the bill will pass, even if reconciliation is required. The Senate began the process of debating amendments to the president’s proposal early Thursday and voted several hours ago after pulling an all-nighter on Capitol Hill. The budget resolution was passed 51-50 with Vice President Harris breaking the tie, a step towards using the reconciliation process to pass stimulus without Republican support. The same group of 10 Republican Senators that met with President Biden on Monday wrote the president again on Thursday, saying they continue to “have significant questions” about his stimulus proposal.

Larry Summers Pushes Back Against $1.9T Size in OpEd (WaPo): “In 2009, the gap between actual and estimated potential output was about $80 billion a month and increasing. The 2009 stimulus measures provided an incremental $30 billion to $40 billion a month during 2009 — an amount equal to about half the output shortfall. … In contrast, recent Congressional Budget Office estimates suggest that with the already enacted $900 billion package — but without any new stimulus — the gap between actual and potential output will decline from about $50 billion a month at the beginning of the year to $20 billion a month at its end. The proposed stimulus will total in the neighborhood of $150 billion a month, even before consideration of any follow-on measures.”

Johnson & Johnson Submits Emergency Request for FDA to Approve Single-Shot COVID Vaccine: Late Thursday, Johnson & Johnson submitted a request to the FDA for emergency approval of its COVID-19 vaccine. While the shot proved less effective than the Pfizer and Moderna jabs at blocking COVID-19 in U.S. trials, the vaccine requires just one dose instead of two, can be more easily stored at higher temperatures, and was 100% effective at preventing hospitalization and death. The company said that once FDA approval is granted, it plans to provide 100 million doses to the U.S. by the end of June.


Futures had fluctuated overnight but were little changed Thursday before a positive weekly jobless claims report sent index contracts climbing into the U.S. open. The major indices, led by financials, tech, and other cyclical sectors, continued to strengthen throughout the day, landing the S&P 500 a 1.1% gain and its first record close since a retail short squeeze entangled the bulls last week. The Nasdaq gained 1.2%, also to a record, while the Dow closed up 1.1% but just shy of its all-time high. Also swept up in the optimism, oil prices rose for a fourth session to a more than one-year high. U.S. WTI, which has benefited from hopes for a demand rebound and an OPEC focused on managing supply, closed above $56 per barrel. It took a few hours, but Treasury yields eventually broke free from the upward pull of rising U.K. yields and improved jobless claims. The Bank of England kept policy unchanged and sounded more optimistic than most expected. After reaching as high as 1.16% in early U.S. trading, its second highest level since March, the 10-year Treasury yield settled up just 0.2 bps at 0.139%.

However, longer Treasury yields were moving higher again ahead of Friday’s payroll report amid another widespread rise for global sovereign yields. After shooting higher yesterday, U.K. yields were again out in front of the pack, adding another 6 bps to 0.50%, a new high since March. The persistent optimism this week, fueled by positive vaccine news, a slowing U.S. outbreak, less retail pressure on stocks, improved U.S. economic data, and the push for significant economic stimulus; also nudged U.S. equity futures up 0.4% to a new record before the jobs report’s release. The 10-year yield pulled back from 1.17% to 1.15% after the disappointing BLS update, still a new high since March 2020.

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