It seems fair to say that the December jobs report caught pretty much everyone by surprise. Since it carried equally stunning morsels of good and bad data, the cummulative effect of the report seems to have left most investors unmoved, and most layman confused.
“I think it’s mainly weather,” says Jim Paulsen, chief investment strategist at Wells Capital Management in the attached video. “They do record the number of people who can't get to work because of the weather and I think (December) was the largest number since 1977.”
Even so, it still begs the question; How could the unemployment rate hit a 5-year low of 6.7% when only 74,000 jobs were created?
The answer lies in the two-pronged manner in which the data is collected, Paulsen explains, saying the establishment survey is what Wall Street watches but the household survey is what moves the unemployment rate. It’s not uncommon for the reports from the business community and individuals to vary widely, Paulsen says, nor is it going to be a bad thing for the market.
“It’s definitely a mixed bag but in some ways, for the market, not too bad because there was a sense of things getting almost too strong” he says. “For both bonds (^TNX) and stocks (^GSPC), maybe a month of cooling off is not all bad.”
In fact, Paulsen says, had the report come in especially strong, that might have triggered a very bad reaction based upon fears that it would allow the Fed to accelerate their exit from the bond buying program.
Instead, with a mixed bag to mull over, Paulsens says he thinks the Fed “will continue to taper at the measured pace they suggested prior to the report.”
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