Instant View: Strong jobs growth in December feeds bullishness

(Reuters) - U.S. job growth surged in December and employment for the prior two months was revised sharply higher, suggesting that a recent manufacturing-led slowdown in economic growth would be temporary.

Nonfarm payrolls increased by 292,000 last month, the Labor Department said on Friday. The unemployment rate held steady at a 7-1/2-year low of 5 percent even as more people entered the labor force, a sign of confidence in the labor market.

STORY: TABLE

KEY POINTS:

* October and November payrolls were revised to show 50,000 more jobs created than previously reported, adding to the report's upbeat tone. The only wrinkle was a one cent drop in average hourly earnings, but that was most likely because of calendar effects which should reverse in the January report.

* The solid employment data should soothe fears over the economy's health and suggests the recent weakness in activity is mostly limited to the manufacturing and export-oriented sectors, which have been hit by a strong dollar .DXY and anemic global demand. Efforts by businesses to whittle down an inventory glut and spending cuts by energy companies have also inflicted pain.

COMMENTS:

PHIL ORLANDO, CHIEF EQUITY STRATEGIST, FEDERATED INVESTORS, NEW YORK:

“We’re pretty happy with this number. Looking through, line by line, I really can’t see any weakness. This is actually probably a good number in terms of the market because it showed we’re still cranking despite China, but we’re not so hot that the Fed has to come here in March. I suspect that much like last September when the Fed chose to do nothing because of the Chinese-related volatility over the summer, they may chose again to do nothing in March because of China now, even though a couple of weeks ago we would have thought March was on the table.

“This number right now is sort of a crowning achievement on the week. The ISM service number, auto sales, labor data this week, including the ADP and claims, all of them were pretty good. You take a step back and you say, ‘Wait a second, the U.S. economy isn’t doing so badly.’ China’s got their issues, and there’s clearly negative sentiment impacting what’s going in global markets, but if you’re drilling down on domestic economic data, we’re not doing so bad. Today’s number put an exclamation mark on that.”

KATE WARNE, INVESTMENT STRATEGIST AT EDWARD JONES IN ST. LOUIS, MISSOURI:

“Very impressive, not only was it strong but the previous month was revised up. It is one more sign the domestic economy continues to chug along. It is not a game-changer in terms of faster economic growth but it offsets some of the other indicators that recently have suggested the economy might be slowing down and that is actually good news.

"Maybe today investors will focus on the fact the world has more going on than China. Yes, China is a risk and it is certainly going to create more volatility but it is not the only thing to pay attention to.”

PETER CARDILLO, CHIEF MARKET ECONOMIST AT FIRST STANDARD FINANCIAL IN NEW YORK:

“Obviously the 292,000 number that came in is very strong. It’s a very strong labor report that indicates, notwithstanding some weaker economic activity, the private sector continues to add on workers, which is a good sign.

“This should be helpful for stocks today, it’s also going to strengthen the dollar, and of course, weaken bonds as yields move higher. It’s a good report. There’s no wage pressure; that’s key. The participation rate remains at low levels. And the work force continues to grow.”

MARKET REACTION:

STOCKS: U.S. stock index futures ralliedBONDS: U.S. bond prices fell and yields roseFOREX: The dollar rose

(Americas Economics and Markets Desk; [phone])