Investors look to potential jobs growth

By Tom Ryan

NEW YORK (BestGrowthStock) – Treasury prices are expected to remain range-bound next week as investors await evidence of labor market recovery with the release of January payrolls data on Friday.

Prior to the jobs data, the Treasury’s announcement of its February refunding is the most significant event of the week.

The market was surprised Friday by the advance report on fourth-quarter growth, which showed the economy grew at a 5.7 percent rate, the fastest quarterly increase in six years. As the economy rebounds from the worst recession since the 1930s, that boosts hopes for jobs growth in the coming unemployment report.

“Everyone’s focus is going to be next Friday’s job numbers,” said Bill Bemis, portfolio manager with Aviva Investors North America, in Des Moines, Iowa. “Is it going to continue to signal that this recovery is real?”

Analysts polled by Reuters expect nonfarm payrolls to rise by 5,000 in January after U.S. employers unexpectedly cut 85,000 jobs in December. The household unemployment rate is expected to remain steady at 10 percent.

The labor market often lags other parts of the economy when recovering. Despite the blistering pace of GDP growth in the fourth quarter, some are still concerned that diminished government support will short-circuit the recovery.

The economy is “improving, but I’m not sure it’s improving at a stable rate,” said Michael Toporek, chief investment officer with Brookstone Partners Asset Management, in New York.

Growing skepticism over the sustainability of the U.S. recovery, together with a spurt of month-end portfolio rebalancing, boosted Treasuries on Friday. Benchmark 10-year notes posted their biggest monthly decline in yield since March 2009.

Even with President Barack Obama’s shift in focus to jobs in his State of the Union Address, many economists reckon it will be years before unemployment is back to pre-recession levels.

On Monday, investors will get a snapshot of U.S. manufacturing sentiment after favorable regional surveys on business activity around the country.

The Institute for Supply Management will release its closely followed index on national factory activity in January.

Analysts polled by Reuters forecast a rise in the index to 55.2 from December’s 54.9, which would be the sixth consecutive month of expansion. Wednesday will bring the ISM’s survey on the services sector, which is expected to come in at a reading of 51. A level greater than 50 reflects expansion.

The government easily sold $118 billion in notes this past week. The size of the upcoming refunding is expected to exceed November’s record of $81 billion.

“I think you’re going to see those new records set through out 2010,” Bemis said.

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(Reporting by Tom Ryan, additional reporting by Burton Frierson, Richard Leong and Emily Kaiser; Editing by Dan Grebler)

Investors look to potential jobs growth