Summary for Week ending February 2nd

The big story of the week was the negative print for Q4 GDP. However the underlying details were better than the headline number and most analyst shrugged off the slight contraction as a combination of "one-off drags". And we are already starting to see upgraded forecasts for Q1 2013. As an example, from Jan Hatzius at Goldman Sachs: 

"We now expect a rebound in real GDP growth to 2.6% in Q1 as the one-off drags unwind."

The headline number for the employment report was a little below expectations, but the upward revisions to previous months more than offset the disappointment. November was revised up from +161,000 to +247,000 jobs added, and December was revised up from +155,000 to +196,000. Over the last 3 months, the economy has averaged 200,000 jobs per month - and that was above expectations.

For manufacturing, the ISM index was solidly above expectations, and the underlying details were also positive.  As an example, the new orders index was at 53.3%, up from 49.7% in December (above 50 is expansion).  This was much better than the regional surveys indicated.

Other positives includes construction spending (up solidly in December with upward revisions for prior months), and January auto sales (off to a solid start in 2013).

Overall the data still suggests sluggish growth.  There will probably be more drag from the payroll tax hike - and possibly the "sequestration" cuts, but it appears the outlook is improving.

And here is a summary of last week in graphs:

' January Employment Report: 157,000 Jobs, 7.9% Unemployment Rate

Click on graph for larger image.

From the BLS:

Total nonfarm payroll employment increased by 157,000 in January, and the unemployment rate was essentially unchanged at 7.9 percent
...
The change in total nonfarm payroll employment for November was revised from +161,000 to +247,000, and the change for December was revised from +155,000 to +196,000

[Benchmark revision:] The total nonfarm employment level for March 2012 was revised upward by 422,000 (424,000 on a not seasonally adjusted basis).

The headline number was below expectations of 185,000. However employment for November and December were revised up sharply.

This graph shows the job losses from the start of the employment recession, in percentage terms, compared to previous post WWII recessions. The dotted line is ex-Census hiring.

This shows the depth of the recent employment recession - worse than any other post-war recession - and the relatively slow recovery due to the lingering effects of the housing bust and financial crisis.

This was another sluggish growth employment report, but with strong upward revisions to prior months.