• support@madhedgefundtrader.com
  • Member Login
Mad Hedge Fund Trader
  • Home
  • About
  • Store
  • Luncheons
  • Testimonials
  • Contact Us
  • Click to open the search input field Click to open the search input field Search
  • Menu Menu

The Nonfarm Payroll Shocker

Diary

Economists were left speechless with Friday?s report of the January nonfarm payroll, which came in at an amazing 243,000, more than double the consensus expectations. It was the sharpest improvement in the data since April. Analysts have become inured to bad data that a mediocre report sounds like The Second Coming.

The headline unemployment rate plunged from 8.5% to 8.3%, and is now down an eye popping 0.5% in two short months. Unemployment is now at a three year low. More importantly, it was the second month in a row where the report delivered a major upside surprise.

The private sector led the charge, with new hiring accelerating from 220,000 to 257,000. Average hourly earnings increased by 0.2%. While most nonfarm payroll reports are a confusing jumble of contradictory statistics, this one was almost universally good. Is this the beginning of an important new trend? Are the good times here to stay?

I am no so quick to leap to that conclusion. Past economic recoveries have seen 400,000 jobs added monthly at this stage. The economy needs to add 150,000 jobs per month just to keep up with natural population growth. Never mind that a far larger portion of these new jobs are earning only minimum wage than in the past, far lower than the incomes that went into this recession. Union assembly jobs are out and burger flipping ones are in. The overall net drag on the economy is large.

In fact, this rate of job growth is contestant with an economy that is growing at a 2.0%-2.5%, nicely matching my own prediction and that of the congressional Budget Office. On the other hand, the stock market is reacting as if the GDP was growing at a 4.0% rate, far higher than reality. When it wakes up to reality, the reaction could be harsh.

Let me tell you what I am taking great pains not to do here. I am not trying to cherry pick the data in order to support my own fundamentally cautious view. I am not looking for the clouds within the silver lining. I see perma bulls and perma bears do this all day long, usually with grievous results. Your net worth suffers as a result. The challenge here is to look at the data alone, and ignore the spin, hype, and emotion.

I see the nonfarm report as far more likely to set up a ?sell? of risk assets than a ?buy?. Look at the charts below and tell me that I am wrong. Are those double tops on the S&P 500 and the Russell 2000? Only the NASDAQ disagrees.

 

 

 

 

 

Share this entry
  • Share on Facebook
  • Share on X
  • Share on WhatsApp
  • Share on Pinterest
  • Share on LinkedIn
  • Share by Mail
https://www.madhedgefundtrader.com/wp-content/uploads/2012/02/Fotolia_13359031_Youre-Hired-150x150.jpg 150 150 DougD https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png DougD2012-02-05 23:02:172012-02-05 23:02:17The Nonfarm Payroll Shocker

tastytrade, Inc. (“tastytrade”) has entered into a Marketing Agreement with Mad Hedge Fund Trader (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade and/or any of its affiliated companies. Neither tastytrade nor any of its affiliated companies is responsible for the privacy practices of Marketing Agent or this website. tastytrade does not warrant the accuracy or content of the products or services offered by Marketing Agent or this website. Marketing Agent is independent and is not an affiliate of tastytrade. 

Legal Disclaimer

There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.

Copyright © 2025. Mad Hedge Fund Trader. All Rights Reserved. support@madhedgefundtrader.com
  • Privacy Policy
  • Disclaimer
  • FAQ
Link to: February 6, 2012 - Quote of the Day Link to: February 6, 2012 - Quote of the Day February 6, 2012 - Quote of the Day Link to: Rumblings in Tokyo Link to: Rumblings in Tokyo Rumblings in Tokyo
Scroll to top