Why Friday’s Jobs Report Was Better than It Seemed


Quantity versus quality? That question mattered a lot in last week’s non-farm payrolls report.

On the surface, it was bad because total jobs rose just 148,000 in December. That was well below the 190,000 projected by economists. Looking much deeper, there were some noteworthy positives.

First, the biggest drop occurred the retail sector. That shouldn’t be a surprise to anyone given mass closures in shopping centers across the country.

Second, and more importantly, more valuable parts of the economy saw big gains — especially manufacturing. A seasonally adjusted 25,000 factory jobs were added in December, following a gain of 31,000 in November. That combined increase of 56,000 was the best two-month showing since we clawed back from the financial crisis in March 2012. (By the way, bean counters at the Labor Department are likely to revise the latest numbers.)

Manufacturing matters because it creates other jobs in the economy: Machinery, transportation, warehousing, electricity, etc. Its products may also get exported, which lifts gross domestic product.

Residential construction stood out as well. Given the strength of October, let’s widen our time frame. This time, we see 21,700 jobs added in October, November and December — the biggest gain over a rolling three-month period since March 2006. On top of that, the 780,000 construction-site jobs represented the highest number in the business in more than nine years.

And consider how much things have changed since those halcyon days before the crash. Then, a glut of unsold structures and inflated prices hung over the market. Now, realtors beg for listings and analysts see higher prices based on supply and demand. Mortgage lending has also been pretty calm, with annualized growth of less than 4% every quarter since the crash. (It grew at an 8-15% clip as the bubble inflated.) Given the demographic trend of millennials needing houses, you don’t have to be Pollyana to expect further improvement.

Bottom line: While caution is always warranted, the combination of strong manufacturing and construction trends seems to bode well for markets as 2018 unfolds.

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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.