Friday’s Employment Situation report, released by the Bureau of Labor Statistics, could help the U.S. market begin to rebound from its worst start to the year in history. In the first four trading days of 2016, large cap stocks are now down approximately 5%. The technology and financial sectors have led the S&P 500 lower. In the Dow Jones Industrial Average, technology and financial stocks have also been a factor. Goldman Sachs (GS, Financial), down 8.66%, and JPMorgan (JPM, Financial), down 8.06%, have weighed on the DJIA, which is down 5.2% for the year. Apple (AAPL, Financial) is also leading losses, down 8.37%.
Friday’s better than expected report on U.S. nonfarm payroll hiring, however, could give stocks the boost they need to rebound. As indicated by ADP’s private sector employment report, the U.S. economy added significantly more jobs than predicted for December. According to the Bureau of Labor Statistics, private and public sectors in the U.S. added a total of 292,000 jobs in December, 92,000 higher than economists had estimated at 200,000. Despite the substantial increase, the unemployment rate still remained unchanged at 5%.
Given the economy’s current situation, an increase of 292,000 payrolls was extremely positive given global oil price levels. In the mining sector, which includes energy companies, payrolls were down 8,000 from a decrease of 11,000 in November. Continued stagnation in energy sector hiring is expected to continue in 2016 as oil prices show no signs of improvement.
Services hiring continued to trend higher overall for the broader economy with hiring in services up 14% to 230,000. All of the reported subsectors in services increased payrolls in December, with professional and business services adding 73,000 jobs for an increase of 248% from the previous month.
Production companies added 45,000 jobs in December for an increase of 15%. While the mining sector dragged on production, it seems that U.S. goods-producing companies still improved overall, signifying that global manufacturing issues could be more of an international concern.
The positive report is likely to help improve valuations for U.S. stocks, which have primarily been affected by global issues in the first few trading days of the year. The positive report could also add to the likelihood of a further rate increase by the Federal Reserve in March, as improved labor market effects have been a leading factor in the Fed’s monetary policy decisions.
