US Employment Indicators (Excerpt)

Last December, I wrote: “[M]y working hypothesis is that the fiscal cliff will be averted and there won’t be a recession next year.” I also predicted: “Averting the fiscal cliff could be very stimulative for the economy.” The cliff was averted, but the payroll tax rate was raised back to 6.2% from 4.2%, and marginal tax rates were increased for high-income taxpayers. Evidence is mounting that the economy is performing very well so far this year despite the tax hikes. The jury is out on the impact of the March 1 sequester, though that certainly hasn’t stopped the DJIA from rising to record highs over the past two days.

According to ADP, nonfarm private payroll employment rose solidly last month by 198,000. This series closely tracks the comparable official series compiled by the Bureau of Labor Statistics (BLS). January’s increase was revised upwards by 23,000 to a gain of 215,000. The latest gains were fairly evenly distributed among large companies (57,000), medium companies (65,000), and small companies (77,000). This confirms my view that dodging the fiscal cliff gave the economy enough of a boost to offset the fiscal drag attributable to the tax hikes and the sequester.

Today's Morning Briefing: Modest to Moderate: (1) Averting the cliff was stimulative and bullish. (2) Two shades of beige. (3) Fed’s national survey more positive than district surveys. (4) Latest employment indicators looking good. (5) Big rebound in machinery orders. (6) Good news for Industrials boosts their stock prices. (7) Weak economies weighing on the euro, pound, and yen. (8) Will rising trade-weighted dollar depress S&P 500 revenues and earnings? (More for subscribers.)