Less bad may turn good

Less bad may turn good today in terms of the labor market. The consensus for Dec payrolls is for a flat reading after an 11k drop in Nov which was more than 100k better than expected (thus watch for possible revision). Whether it’s flat, up 10k or down 10k, we know the pace of firings has slowed but the question of how fast we get job growth still is highly uncertain. In order to get a sustainable drop in the unemployment rate the economy needs to have 125k+ job growth each month. The rate today is expected to remain unch at 10% and will remain stubbornly high even after jobs are being created because of the potential flood of new people into the labor force as they look for jobs. Avg weekly hours are expected flat and is a key data point. The treasury market background before the release has the 10 yr back to 3.85% and inflation expectations in TIPS at the most since July ’08. Canada unexpectedly shed jobs in Dec after big upside in Nov.

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