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LIVE MARKETS-Jobs report deep dive: A pony in there somewhere

Fri, 8th Jan 2021 16:35

* Nasdaq, S&P 500 advance; Dow falls

* Cons disc leads S&P sector gainers; comm svcs weakest

* Europe's STOXX index up ~0.5%

* Dollar, crude gain; gold drops

* U.S. Treasury 10-year yield ~1.12%

Jan 8 - Welcome to the home for real-time coverage of
markets brought to you by Reuters reporters. You can share your
thoughts with us at

EST/1605 GMT)

There's an old joke about a fool who was found digging
through a huge pile of manure. When asked why, he said "there's
got to be a pony in here somewhere."

But while the hotly-anticipated employment report was a
bummer at first glance, digging deeper into the data, well, it
was still mostly a buzz-kill.

The U.S. labor market lost 140,000 jobs in the
last month of 2020 according to the Labor Department, a downside
shock compared with the tepid gain of 71,000 analysts expected.

November's upward revision to 336,000 from 245,000 and the
unemployment rate holding steady at 6.7% provided
some cold comfort.

But the report marked the first decline since the recovery
began and provided a grim reminder that the workforce has only
reclaimed just over half of the 22.2 million jobs hemorrhaged in
March and April when the pandemic brought the U.S. economy to
its knees.

"The fact that the economy still counts 9.8 (million) fewer
jobs than prior to the pandemic is appalling," writes Gregory
Daco, chief U.S. economist at Oxford Economics.

Adding salt to the wound, the ranks of the longer-term
unemployed are swelling. Americans out of work for 27 weeks or
longer account for the largest piece of the unemployment pie,
even as weekly initial jobless claims remain bruisingly high.

"The share of long-term unemployed continued its ascent,"
Daco added. "These scarring effects pose downside risks to the
recovery and could lead to elevated long-term unemployment and
weakened labor market attachment for years to come."

While the manufacturing, retail trade and business services
sectors added jobs, these gains were offset by crushing losses
in leisure & hospitality and education.

Customer-facing services jobs, typically at the low end of
the wage scale, continue to suffer the worst effects from
efforts to contain the resurgent coronavirus.

Evidence of this can be seen in the bump-up in year-on-year
average hourly earnings growth, from 4.4% to 5.1%.

"There's a belief that this is temporary," said Brian Price,
head of investment management for Commonwealth Financial
Network. "Hopefully this is the last phase and we'll see gradual
reopenings and those lower wage jobs come back online and we'll
see an improvement in future jobs reports."

And now for the ponies.

The labor market participation rate held steady at 61.5%.
While the rate is still depressed, at least it suggests more
Americans haven't grown so discouraged they've permanently
exited the labor market.

And finally, the persistent racial/ethnic unemployment gap

While white unemployment edged up to 6% from 5.9%,
unemployment among African Americans fell to 9.9% from 10.3% in
November, shrinking the gap there to 3.9 percentage points from
4.4 percentage points.

But, on the downside, the Hispanic jobless rate jumped from
8.4% to 9.3%.

While the report appeared to cause a brief pre-market paring
in stock futures, investors appeared to take the data in stride
by regular session morning trading. While the Dow was in the
red, the S&P 500 and the Nasdaq were in positive territory as
investors looked toward more stimulus and bet on imminent
economic rebound.

"Markets are expecting a spring-loaded economic recovery,"
Price added. "That's what's driving the markets right now."

(Stephen Culp)



Optimism over the short-term direction of the U.S. stock
market jumped to its 4th highest level of the past 2 years in
the latest American Association of Individual Investors (AAII)
Sentiment Survey. With this, both bearish and neutral sentiment

AAII reported that bullish sentiment, or expectations that
stock prices will rise over the next six months, jumped 7.95
percentage points to 54.03%. Optimism was last higher in
mid-November (55.84%), and is above its historical average of
38.0% for the ninth consecutive week.

Bearish sentiment ticked down 0.19 percentage points to
26.61%. Pessimism is below its historical average of 30.5% for
the ninth straight week.

Neutral sentiment plunged 7.7 percentage points to 19.4%.
With this fall, neutral sentiment is below its historical
average of 31.5% for 49th time in the past 52 weeks.

Of note, besides mid-November of this year, bullish
sentiment was last higher during two weeks in early to
mid-January 2018 (59.75% and 54.11%). The S&P 500 topped
on January 26, 2018, and promptly slid as much as 12% over the
next ten trading days.

With these changes, the bull-bear spread rose to +27.42 from
+19.28 last week:

(Terence Gabriel)


LOSSES (0907 EST/1407 GMT)

CME e-mini S&P 500 futures are suggesting an opening
gain for the S&P 500 index. This after data showed that
the U.S. economy shed jobs for the first time in eight months in
December as the country buckled under an onslaught of COVID-19
infections, suggesting a significant loss of momentum that could
stall the pandemic recovery.

While economists polled by Reuters had expected the economy
to add jobs, non-farm payrolls decreased by 140,000 jobs last
month, the Labor Department said on Friday.

However, November payrolls were revised up to show 336,000
jobs added instead of 245,000 as previously reported.

While strategists said they were disappointed by the
December number, Steven Ricchiuto, U.S. chief economist at
Mizuho Securities USA LLC in New York suggested that the market
reaction could be tempered by hopes for additional fiscal
stimulus aimed at bolstering the weak economy.

“I don't think you really have a negative equity market
environment on this," he said. "People are going to say the
federal government is going to step up to the plate before the
$2,000 checks are issued and what else they can throw on top of
that in the new Congress to throw additional support behind this
thing is going to be the driving motivation and that's what the
markets is going to bet on today."

Meanwhile, Congressional Democrats were weighing impeaching
U.S. President Donald Trump for an unprecedented second time
after his supporters, inflamed by his false claims of election
fraud, stormed the U.S. Capitol.

Here is your premarket snapshot:

(Sinéad Carew, Herbert Lash)



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