Monday 29 February 2016

U.S. jobs report for February comes at pivotal time

In World Economy News 29/02/2016

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There’s only one way to erase any doubt about whether the U.S. economy has gotten stuck in another rut: Show a rebound in hiring in February.
The government on Friday is expected to report that, yes indeed, job creation picked up in February. Economists polled by MarketWatch forecast a 195,000 increase in new jobs, up from 151,000 in January. The unemployment rate is likely to remain at 4.9%.
That might be enough to ease concerns temporarily, but not eliminate them entirely. After all, the economy created an average of 274,000 jobs a month in the fourth quarter.
The U.S. is facing a bevy of headwinds.
Stocks have gotten off to a bad start in 2016. Exports have tumbled because of a strong dollar and weak global economy. Energy producers have slashed investment to respond to cheap oil. Businesses are investing less because of lax demand. And a topsy-turvy presidential election characterized by populist policy ideas that businesses find worrisome is adding to the anxiety.
“How do we model fiscal policy in 2017 and beyond?” asked Phil Orlando, veteran chief equity strategist at Federated Investors, who pays close attention to Washington. “We have no freaking clue.”
A snapback in job creation that exceeds Wall Street’s forecast would provide some short-term clues. An increase well north of 200,000, for example, would do wonders to perk up investors.
One reason to think such a healthy gain is likely is the low level of jobless claims, a rough gauge of whether layoffs are rising or falling. Jobless claims fell in mid-February and were at the lowest level in years. Another sign: job openings are near a record high.
“With solid employment growth, a declining unemployment rate, and historically low initial claims suggest that concerns of a near-term U.S. recession are overblown,” economists at Barclays Capital wrote in a report.
The flip side of the argument is that a cooler economy at the end of 2015 and in early 2016 may have caused companies to scale back hiring, at least temporarily, to get a better sense of what’s going on.
In a week chock full of economic reports, there’ll be plenty of data to dig into for even further clues: auto sales, service-sector growth, the health of manufacturers, trade and factory orders. The Federal Reserve will also chime in with its regular snapshot of the economy known as the Beige Book.


Source: MarketWatch