Economic Journal - Friday, 2/5/2016

(As of 7:20 am PST)

It’s been a back and forth week for the US stock market. Market fluctuations and quick, “out of nowhere” price movements have become the norm this week. There’s strong and valid points to both the bull and bear argument for stocks and that could be what’s causing the back and forth action right now. Let’s take today’s ever important non-farm payrolls report as a case in point. The private sector added 151,000 jobs in January, much lower than the 190,000 consensus estimate. December numbers were revised downward from 292,000 to 262,000 while November jobs were revised higher from 252,000 to 280,000. The weakness in new jobs added in January was offset by a positive reading on unemployment and wages. The unemployment rate fell to 4.9% while wages accelerated 0.5% in January for a year-over-year growth rate of 2.5%. The average workweek was up slightly while the labor participation rate ticked higher as well – all good signs. The market is showing us a mixed reaction because the report was…well…mixed. On the one hand, the data is strong enough to put the Fed back on its path to rate normalization this year. The probability of a March rate hike has been declining since the market selloff that began in early January. However, today’s payrolls data suggests the US economy continues to head in the right direction amid the global economic turmoil of late and that the Fed may have a case for its rate hike path this year. There’s enough weakness in the report, though, to justify a pause for the Fed (especially at its March meeting). For now, the markets look like they will continue in lock-step with oil prices, which are down 1% today. International markets tiredly limped into the weekend after back and forth sessions on Friday as well. There’s a lot of uncertainty that remains out there, but there seems to be some signals pointing toward a nice upswing in the coming weeks, especially if we can find more stability in the energy market.