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January’s Data Showed the Biggest Gain in the Average Hourly Earnings Since 2008.

The all-inclusive unemployment data is data is released at 8:30. What will the data suggest?  The statistics have a high hurdle to meet given the large January “beat.”  Were the labor markets held back by the weather and the slowdown at the West Coast ports?

In my view there are two major components that most will closely scrutinize; wage growth and the labor participation rate (LPR).  January’s data showed the biggest gain in the average hourly earnings since 2008.  Are these gains sustainable?

The participation rate was 62.9% in January up from 62.7% in December, a LPR that matched the lowest in decades.  Some have trumpeted the multi month consecutive 200,000 plus gains in non-farm payrolls but in my view non-farm payrolls will have to increase by over 300,000 for several months in order to increase the LPR to respectable levels.

Analysts are expecting a 5.6% unemployment rate, a 235K and 225K increase in nonfarm and private sector payrolls.  Average hourly earnings are expected to rise by 2.1% with an average hourly workweek of 34.6 hours.  The LPR is expected to remain unchanged at 62.9%.

Potentially broad based conclusions can be made from this data.

Last night the foreign markets were mixed.  London was down 0.24%, Paris up 0.08% and Frankfurt up 0.15%.  Japan was up 1.17% and Hang Sang down 0.12%.

The Dow should open quiet heading for their sixth weekly loss of the year but this could change radically after 8:30.  The 10-year is off 1/32 to yield 2.12%.

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Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.