Employment gains despite the disruption of Hurricane Sandy were a bright spot amidst market concerns over the fiscal cliff and Eurozone interest rates, according to an analysis by Miller Tabak & Co. Chief Economic Strategist Andrew Wilkinson.
The manufacturing and construction sectors reported declining employment, with the latter shedding 20,000 jobs in the November report. Wilkinson attributes some of the drop in construction employment to Hurricane Sandy, and predicts that a potential $80 billion federal recovery effort could boost the sector’s jobs in 2013. One other negative element of the report was the net 49,000 downwards revision to job creation.
On the other hand, retail employment grew by 53,000, as the unadjusted pace of hiring reached its highest level on record. Wilkinson predicts that the industry will continue to make gains through the holiday season, which has gotten off to a strong start.
Other key sectors also made gains, according to the report. “As we noted ahead of the reading the larger and most important areas of overall payrolls continued to support the view that economic recovery has significant traction surrounding it,” Wilkinson says. “Education (+18,000), professional (+43,000) and leisure (+23,000) each built on their recent positive trends.”
Still, an apparent stalemate in the fiscal cliff negotiations continues to impact market confidence, Wilkinson says. The University of Michigan’s preliminary reading of the Consumer Sentiment index fell from 82.7 to 74.5, the largest drop since March 2011. “We should take comfort from the fact that it is the outlook gauge that slid [by 13 points] and that the current situation remains healthy,” Wilkinson says. “Resolution to the fiscal cliff therefore remains the number one objective in couching the recovery.”
Overseas, the euro spiked this morning at $1.2940 from a morning trading level of $1.2877 on concerns that the European Central Bank (ECB) will cut rates at its next meeting. According to Wilkinson, a report from Market News International suggests that ECB President Mario Draghi and Bundesbank President Jens Weidman are among those who opposed the move. “Whether this reduces the likelihood of a cut going forward, the forex market perceives a more hawkish than dovish stance and created significant short covering, “he says.