SCOREBOARD: Good job

US jobs growth remains strong overall, while a tide of pessimistic commentary on the country is finally turning.

A total of 2.2 million. That’s how many jobs were created in the US in 2012, or an average of 181,000 per month. January’s payroll figure at 157,000 was slightly lower than that also expectations (165,000), but this is fairly insignificant given the scope of upward revisions that we saw last year, which were substantial in some cases. November’s jobs gain of 247,000, for instance, was up from an initial estimate if 161,000. December’s print was revised up to 196,000 from 155,000 (all up, payrolls were revised 300,000 for the year).

For the last three months then, and assuming January’s figure isn’t revised up, we are looking at average jobs growth of around 200,000 per month – that’s very strong growth when you consider that the average monthly growth rate during the boom years of 2003-2007 was about 140,000. Indeed, in 2012 we saw the strongest jobs growth since 2005. Any which way you look at it, this is a significant improvement and the unemployment rate has fallen from 8.5 per cent to 7.9 per cent as a result.

Three things to note. The US economy is doing very well indeed and getting stronger. As I discussed on the day, those weaker fourth quarter GDP figures that we saw aren’t anything to worry about. The weakness is due to temporary distortions and the underlying trend is solid. That’s why we’re seeing such strong jobs growth.

The second thing to note has to do with perceived risk. I’ve noted a dramatic change in US commentary. It’s much more optimistic, much more in tune with reality. These last few years I’ve been a lone voice arguing against US pessimism – even late last year. But now victory is complete and there is no hint of this in the commentariat.

Why is this important? Because it removes one of the three key uncertainties – the three-track CD that has plagued the market, the US double dip or a renewed downturn or whatever.

Finally, for policy I don’t think there are too many implications. There should be.

The Fed should start removing stimulus, but there is no chance they will do this. Indeed, I doubt they’ll even ease up on QE. Remember, it’s a political decision, not an economic one, and they will justify QE any which way they can, no matter how ridiculous or detached from reality those reasons are.

I should add that there was one other piece of good US economic news. The ISM survey, also out on Friday, turned higher in January rising to 53.6 from 50.2. It was a pretty good report with production, orders and employment all up in the month. All good.

Against that backdrop it should be a solid day on the All Ords today. Most of the major global indexes were up over 1 per cent (Dow 1.1 per cent, S&P 1 per cent, Nasdaq 1.2 per cent) or close enough to it, and commodities generally pushed higher as well – copper up 1.4 per cent, silver up 1.9 per cent, gold up $8 to $1669 and crude 0.3 per cent higher to $97.7. The SPI, meanwhile, was 0.5 per cent higher.

For the rest of the week, there is plenty to keep punters occupied but most of it's going to be on the domestic side. The global news and dataflow (well, the dataflow at least) is light. So the big stuff for the US includes the non-manufacturing ISM on Tuesday night, while for Europe we see the ECB's and BoE's rate decisions (no changes expected).

Data-wise, German factory orders, industrial production and trade data will be the key focus. Trade and inflation data from China (Friday) is also very important.

On the domestic, macro front we see quite a few data releases. TD securities inflation gauge comes today, along with ANZ’s jobs ads, plus building approvals. The main focus will of course be the Reserve Bank’s meeting tomorrow (1430 AEDT, although no one looks for a cut) and employment on Thursday. The consensus is that 6,000 jobs were created in January with the unemployment rate forecast to rise to 5.5 per cent. Friday we go back to the Reserve Bank again as they release the Statement on Monetary Policy.

Have a great week…

Adam Carr is a leading market economist.

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