Bellevue Perspectives

Monday Minute

  • After Monday’s rise last week in the PMI, the Supply Management (ISM) reported that the non-manufacturing index (NMI), which tracks the service sector of the economy, increased 0.6 percentage points in January to 55.5%, exceeding expectations for a 55.1% reading.  Also on Wednesday, the ADP National Employment Report was released. It indicated a 291,000 job increase in private-sector seasonally adjusted payrolls for the month of January, nearly doubling expectations for 158,000 added jobs.  Both data points add another leg of support for the rally in the stock market.
  • On Friday of last week January payroll report showed a jump of 225k, well above consensus’ 165k. Headline strength may partially reflect unseasonably warm weather, as construction and leisure industries added 44k and 36k, respectively. The labor supply continued its healthy expansion in January. Particularly impressive is the rising trend in prime age labor force participation, which rose to 83.1% — a cycle high. And it has room to run – it peaked at 84% in 1999.  With the labor force growing, there’s less upward pressure on wages. In January, average hourly earnings accelerated a touch to 3.1% y/y from 2.9%, but remain impressively tame given the 3.6% unemployment rate.
  •  The market remains in rally mode to start the week despite continued spread of the coronavirus, led again by large tech.  Upbeat earnings have investors feeling good for now, but it’s generally accepted that we could see a slowdown in Q1 numbers due to the outbreak.

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