Starting off with a floating stance

The all-important BLS Employment Report shocked the market this morning, showing only 74,000 new jobs created in the month of December.  This is a far cry from the nearly 200,000 number expected, and in complete contrast to the recent ADP report as well as all other economic indicators.

Also shocking the market was the unemployment rate falling from 7% down to 6.7%.  This number must be taken with a grain of salt, as it is directly related to the labor force participation rate falling to just 62.8% of Americans either working or wanting to work.  This is the lowest rate since Jimmy Carter was in office, the BG’s ruled the radio, and Saturday Night Fever was in vogue.  Yep… 1978.  In December alone, 374,000 people left the workforce.  That is 374,000 Americans no longer earning a paycheck and contributing to payroll taxes, who are now either drawing from investments/cash to live or relying on government subsidies to survive.   Not a healthy indication for our overall economic picture.

The surprisingly low number of jobs created adds confusion to the future plans of the Fed with respect to tapering.  They will meet next on January 29^th to discuss their next move.  This brings question into the pace of tapering, and may cause some members to want to slow the pace to allow our job market more time to recover before cutting the stimulus.  Although there are now only 10,351,000 unemployed Americans, that number is still high and may increase is more people decide to get back into the workforce, as we all hope will happen.

We will start today with a floating recommendation.  However, the bond market has a tendency to fade after the euphoric initial response cools, so be on guard.