The December Department of Labor Monthly Payroll report showed a huge miss with only 74,000 new hires in the month of December. Perversely, the unemployment rate declined from 7.0% to 6.7% due to the cessation of extended benefits for 1.6 million people.

Here’s the announcement; “The unemployment rate declined from 7.0 percent to 6.7 percent in December, while total nonfarm payroll employment edged up (+74,000),the U.S. Bureau of Labor Statistics reported today. Employment rose in retail trade and wholesale trade but was down in information.”

The announcement immediately put SPX into negative territory after climbing steadily all night back to the top of the Broadening formation. It has bounced back to about 2 points above the close. The Pre-Market isn’t any help this morning.

It appears that the institutions are goosing the futures to make the payrolls number appear to be good news.

ZeroHedge is not amused, “Markets, it would seem, are choosing to ignore Mark Zandi's sage advice this morning - when faced with yet another example of his ineptly over-optimistic extrapolation "ignore this number - it's going to go away." Stocks had slowly melted up overnight with S&P futures almost back to unchanged on the year and that gain was instantly vaporized on the NFP print - but shortly after bagen to recover losses. Treasury yields have collapsed with 10Y at 2.88%. Gold and silver - which were twitchy going into the number - have surged higher with gold at $1240. The USD is being sold with JPY and EUR strength. It seems the recognition that bad news is bad news in the new "Yellen collar" world is growing on investors. Of course this can change any second...”

The ugly reality is that participation in the labor force has dropped to 1978 levels. “Curious why despite the huge miss in payrolls the unemployment rate tumbled from 7.0% to 6.7%? The reason is because in December the civilian labor force did what it usually does in the New Normal: it dropped from 155.3 million to 154.9 million, which means the labor participation rate just dropped to a fresh 35 year low, hitting levels not seen since 1978, at 62.8% down from 63.0%.”

So, will this be perceived as good news or bad? We’ll know at the open.

Regards,

Tony

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