We just received the January Employment Report that showed 151,000 jobs were added during the month, well below the 188,000-190,000 that was expected. Factoring in the revisions to November and December, we are once again on the path of slower job creation month over month (280,000 in November; 262,000 in December and 151,000 in January).
This trajectory matches with the economic data we've been getting, which points to a dramatic slowdown in the domestic manufacturing economy and a slowdown in the pace of the domestic service sector.
The quick reaction to the weaker-than-expected January Employment Report is the Fed will indeed hold off boosting interest rates until later in 2016 than first thought. While the market may goose its way higher after the open, with the exception of the financials as a push out in rate hikes mean net interest margin assumption need to be rethought, we should not rule out a fade in the market as the realization of what such a month-over-month drop in job creation means for the speed (or lack there of) of the domestic economy.
Given the boost in average hourly wages, up 2.5% year over year, we are likely to see investors continue to gravitate to consumer staple stocks, like Clorox (CLX), Colgate Palmolive (CL) and the like as well as higher dividend yielding stocks like Physicians Realty Trust (DOC) and AT&T (T), both of which have been solid performers thus far in 2016.
The bottom line is today's jobs miss means investors will once again be scrubbing their growth expectations for the economy and for corporate earnings. Given the fall off in seasonal hiring as the post-holiday return cycle fades, we expect a flat to down job creation in February and that should fan the flames of a later than initially though interest rate boost from the Fed.
Ah yes, the bumpy ride looks to continue for the market. For us at the Growth Seeker portfolio, we continue to like our move into cash in early January, which has allowed us to weather storm rather nicely, as we evaluate which positions to add next at what's shaping up to be far better prices.