The Labor Department reported today that non-farm payrolls declined by 201,000 during January. This bumped the unemployment rate up to 5.8% versus 5.6% during December. The January job loss was the largest monthly employment drop since April 1991, and the jobless rate was the highest since April 1995. The annual rate of job creation rose steadily from 1991 to March of 1995. Since then, the rate declined steadily from a peak of approximately 3.2% to January's rate of 1.18%. So, the number of jobs is still increasing; but, at a slower and slower rate.

The Labor Department attributed the slump in January -- at least, in part -- to the Great Blizzard of '96. The coming months will prove whether or not this was a weather-induced anomalous data point or the start of an acceleration in the rate of joblessness.

Today's release also reported that during January the average workweek declined from 34.3 hours to 33.7 hours, and that the average hourly wage increased six cents to $11.68. This last figure, coming on the heels of an increase of five cents in December, is worrysome from an inflation perspective. The rate of increase in the last two months translates into an annualized rate of 5.7%. We'll also keep an eye on this figure in the coming months to see if a trend is developing.

This morning the University of Michigan revised the figure for its index of consumer sentiment for January. The January 19 reading of 89.9 was revised downward to 89.3. This caused the average of the U of M index and the Conference Board index to edge down from 88.5 to 88.2. The University also revised the January figure for its Expectations Index upward from 78.4 to 78.7. The upwardly revised number still represents a significant drop from the December reading of 83.7. The Expectations Index is one of eleven indicators that the Department of Commerce uses in constructing its Composite Index of Leading Economic Indicators.

Elsewhere in academe, the Columbia University Center for International Business Cycle Research (CIBCR) announced today that in January its Leading Inflation Index fell to 103.4 from a revised value of 103.7 in December. The November number was 103.8 and the October number was 104.4. The index leads the inflation rate by approximately six months. So, the message in these numbers is that sometime around mid-year the rate of inflation is likely to be declining. It has been reported that Fed Chairman Alan Greenspan watches this indicator closely for clues on the status of inflationary pressures.

Summing up: Unemployment jumped dramatically in January (maybe); hourly wages appear to be creeping upward; consumers are feeling badly about current economic conditions and even worse about the prospects for the future; one of Chairman Greenspan's allegedly favorite indicators is saying that inflation will decrease further. It looks like the count is 4 to 1 in favor of slow economic growth and moderating inflation. Going back over the reports for the entire week I find that the vote turns out to be 10 to 3 in favor of the slow growth/controlled inflation scenario.

Byline: Lafferty (MF Merlin)