Unemployment Rate Drops To 7.7 from 7.9 Percent: Is QE Over?

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Unemployment Rate Drops To 7.7 from 7.9 Percent: Is QE Over?

Unemployment rate drops to the lowest level in 4 years.

Yesterday the unemployment report showed the U.S. economy is gaining strength.  The U.S. economy added 236,000 jobs last month, according to the Labor Department report released Friday.  The January data was revised down from 150,000 to 119,000 workers.

In essence, unemployment tipped near 8 percent and fell back down if the February 2013 number isn’t revised as well.  Unemployment fell to the lowest level since December 2008 but hasn’t moved much since President Obama became President/Chief Economic Steward.

Is QE Over?

The possibility that the Fed may need to start signaling the end of quantitative easing has increased.  Although QE to infinity isn’t slated to end anytime soon, the likelihood that the FOMC will begin signaling rises with every strong employment report.  This makes us bearish in the short-run if market participants see the need to rotate investments but if investors shrug any leaks related to QE3 ending, the longer-term rally still has much more steam.

We are watching small caps and the TLT carefully to monitor market sentiment.  If Fed speak and related news becomes more relevant, this could increase downside risks.

 


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