Pre-Market Primer: Manufacturing and Construction Jobs Bounce Back

By Vincent Trivett  JAN 04, 2013 8:53 AM

Economists hit it on the head this time.


MINYANVILLE ORIGINAL The jobs situation in the United States improved by as much as economists expected in December.

Nonfarm payrolls increased by 155,000 and the unemployment rate ticked up to 7.8%. The participation rate held at 63.6%.

A few sectors shed workers. Retail trade let go of 11,300 people, government lost 13,000, and information services lost 9,000. There was a notable comeback in construction and manufacturing, which added 30,000 and 25,000 respectively. Health-care employment rose by 55,000 last month.

After the jobs report was released this morning, stock futures showed modest gains. Futures on the Dow Jones Industrial Average (INDEXDJX:.DJI) rose 0.02% to 13,319 and S&P 500 (INDEXSP:.INX) futures gained 0.10% to 1,454.70. Nasdaq (INDEXNASDAQ:.IXIC) futures are up 0.25% to 2,732.00.

Before the release of the jobs report, global equities declined after minutes of the Federal Reserve's December policy meeting revealed that the central bank is taking a decidedly more hawkish stance. Some members of the Fed are worried about the long-term impact of virtually unlimited asset purchases. Last month, the Fed said that it will continue asset purchases as long as the unemployment rate is above 6.5% and inflation is under 2.5%. The dovish call underpinned risk appetite in the markets, but now, questions over how long the central bank will continue this policy has reduced investors' demand for shares. Some members of the FOMC would prefer to end unlimited quantitative easing by the middle of this year.

Today's decent jobs report might further raise fears that the Fed will turn more hawkish.

Also on tap today are factory orders and the ISM non-manufacturing index, both out at 10:00 a.m. Factory orders are expected to have risen 0.3% in November 2012 after rising 0.8% in the previous month. Economists expect the ISM survey to show a slightly slower rate of expansion of non-manufacturing sectors. The index is expected to tick down to 54.5 from 54.7.

European and Asian equities fell this morning, though Japan's Nikkei Index (INDEXNIKKEI:.NI225) opened the year rising 2.82% to a 22-month high of 10,688.11, lifted by a weaker yen. The yen passed the threshold of 88 yen /$1 today. The euro also fell against the greenback. The dollar's relative climb has made dollar denominated assets as well as energy futures more expensive, contributing to a decline in prices.

Citigroup (NYSE:C) advanced after Goldman Sachs (NYSE:GS) added the bank to its conviction buy list. Goldman analysts signaled confidence in Michael Corbat, Citi's new CEO.

Last year was the best for US auto sales since 2007. Automakers and analysts warn that the continued fiscal battle in Washington, namely the debt ceiling fight, could temper Americans' appetite for new vehicles. General Motors (NYSE:GM) and Ford (NYSE:F) both forecast that Americans will buy 15 million new cars in 2013.

European shares fell despite a small sign that the eurozone economy might be improving slightly. Markit's Eurozone Composite PMI showed that manufacturing and services declined at a slower pace in December. The index rose to 47.2, the highest level since March, from 46.5 in November 2012. Readings below 50 indicate a decline in business activity. Markit says that the data shows some “hope that the eurozone is showing signs of lifting out of its deep double-dip recession.”

Twitter: @vincent_trivett
No positions in stocks mentioned.

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