Bill Losey’s Weekly Economic Update for Feb. 7, 2011

A JOBS REPORT MUCH LIKE THE LAST ONE
Unemployment fell dramatically in January: the Labor Department reported a second straight .4% monthly drop, resulting in the largest two-month reduction of the jobless rate since 1958. While the decrease puts unemployment at 9.0% (the lowest figure since April 2009), just 36,000 net new jobs were created. The implication: due to the weather or discouragement, many job seekers didn’t look for work. “The thumbprints of the weather were all over this report,” Bank of America Merrill Lynch economist Neil Dutta told the Associated Press. “We know the job market is recovering.”

CONSUMER SPENDING IMPROVES 0.7% IN DECEMBER
This beat the 0.5% gain forecast by economists polled by Reuters – and it was the sixth straight positive month for the indicator. The Commerce Department also noted that personal wages increased 0.4% in December. The core Personal Consumption Expenditures price index (PCE) was flat for the month; in 2010, core PCE only increased 0.7%.

ISM: MANUFACTURING, SERVICE SECTOR GROW 2.3%
The Institute for Supply Management’s manufacturing and service sector indices both jumped 2.3% in January. (It was the best month for the non-manufacturing index since August 2005.) The manufacturing index is now at 60.8, and the service sector index is at 59.4. Additionally, the Commerce Department said that December brought a 0.2% improvement in factory orders.

STOCKS LEAP NORTH, EVEN WITH UNCERTAINTY
The market largely turned its attention away from Egypt toward 4Q results and domestic economic indicators last week. The weekly gains were the best since early December: DJIA, +2.27% to 12,092.15; S&P 500, +2.71% to 1,310.87; NASDAQ, +3.07% to 2,769.30. As for fear in the marketplace, one measure of it – the CBOE VIX – dropped 20.66% for the week. Gold ended the week at $1,348.30 an ounce and NYMEX crude at $89.03 per barrel, and copper prices hit an all-time peak Friday.