The US labor market added 267,000 jobs in the private sector last month, the government reports–quite a bit more than the consensus forecast was looking for. The Labor Department also revised the data for recent history and today’s release shows that growth has been stronger than previously estimated. In addition, the latest figures show that wage growth picked up. Bottom line: the news is quite bullish, building on recent strength and, in the process, boosting the odds that the Federal Reserve will start raising interest rates in the near term, perhaps as early as June, according to some forecasts.
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Warren Buffett has his doubts, and so do plenty of other analysts. Weak economic activity overseas is arguably a factor that could delay the onset of US tightening. Based on the domestic trend, however, the case for raising rates soon is compelling, according to Cleveland Fed President Loretta Mester, who said earlier this week that “if incoming economic information supports my forecast, I would be comfortable with liftoff in the first half of this year.”
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● Ukraine crisis: Hollande and Merkel set for Putin talks | BBC
● EU forecasts higher growth amid brief deflation | DW
● US trade deficit widens; weekly jobless claims up modestly | Reuters
● US Consumer Comfort Index Declines From Highest Level Since 2007 | Bloomberg
● German Industrial Output Rises as Economy Recovers | Bloomberg
● Spain Industrial Output Falls Unexpectedly In December | RTT

Private nonfarm payrolls in the US are projected to increase by 231,000 (seasonally adjusted) in tomorrow’s January update from the Labor Department, based on The Capital Spectator’s median point forecast for several econometric estimates. The monthly prediction reflects a moderate deceleration in growth vs. December’s 240,000 gain.
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US jobless claims climbed 11,000 last week, which is no trivial amount. But this is bullish news. Why? Because the previous week’s extraordinary decline—down 42,000 for the week through Jan. 24 in today’s revision—was only moderately pared back. The thinking last week was that the shortened Martin Luther King holiday skewed the data, which inspired forecasts that today’s number would pop sharply higher in a bout of payback. The consensus forecast called a hefty gain today, with claims projected to rise to 290,000. But as today’s release shows, quite a lot of the recent slide remains intact in today’s report. The news translates to a bullish update for anticipating the near-term outlook for the labor market, starting with tomorrow’s official payrolls report from Washington.
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Growth picked up a bit at the start of the new year for the global economy, according to business survey data for January. The JPMorgan Global All-Industry Output Index ticked higher last month, rising to 52.8 from December’s 14-month low of 52.4. (A reading above the neutral 50.0 mark indicates expanding economic activity.) Yes, it’s a mild advance and it hardly marks a sharp reversal from the slowdown that’s been unfolding lately. But the worst fears from some corners of the economic forecasting realm look prematurely dark at the moment.
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● US Private-sector job growth cooled to 213,000 in January, ADP says | LA Times
● PMI: Stronger US services sector growth in January | Markit
● ECB cancels soft treatment of Greek debt in warning to Athens | Reuters
● Germany Factory Orders Rise Sharply In December, Tops Forecast | RTT
● China cuts bank reserve requirement to spur growth | Reuters
● Buffett: Fed rate hike not feasible | CNBC

It’s been a rough week for US economic data. With the exception of auto sales, which surged 13% in January, the numbers so far this week have been disappointing. This morning’s January release of the ADP Employment Report is hardly a washout, although it fell short of expectations. Nonetheless, private payrolls continued to expand above the 200,000-per-month mark in January. True, last month’s 213,000 gain is the lowest since last September. What’s more, today’s news follows updates in recent days of a hefty decline in consumer spending in December; a sharp slide in factory orders at 2014’s close; and a slower rate of growth in manufacturing via the ISM Index. It all looks rather worrisome, but it’s too soon to assume the worst.
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In a previous post I reviewed the basics of using the PerformanceAnalytics package in R for evaluating a simple 60/40 US stock/bond portfolio based on a pair of ETFs. Let’s round out that preliminary review by exploring a few additional applications before moving on to a deeper level of analysis in a future article, when we’ll consider the possibilities for enhancing a 60/40 mix.
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● US factory orders fall sharply, order books shrinking | Reuters
● US auto sales surge 13% in January | LA Times
● Eurozone retail sales rise for 3rd straight month in Dec | Eurostat
● PMI: Growth of Chinese business activity eases to 8-month low | Markit
● PMI: Eurozone economic growth improves | Markit
● PMI: Germany services growth improves at 2015’s start | Markit
● PMI: Sharp UK services growth sustained at start of 2015 | Markit