Perspective: Morning Commentary for January 7

By: Arlan Suderman, Chief Commodities Economist

Fri, 07 Jan 2022, 14:31

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

January 7 – The monthly jobs report provided today’s focus on Wall Street, with traders digesting how Federal Reserve policymakers will interpret the data when they meet later this month. The mixed message of this report created increased uncertainty, pushing the VIX back above 20 in the minutes following their report as stock futures turned lower. The dollar index fell on the reports release, with current values near 96.1, while yields for 10-year Treasuries pushing higher to trade at fresh 9-month highs near 1.76%. Crude oil prices are modestly lower after hitting fresh highs for the move prior to the jobs report. Meanwhile, the Ags remained under pressure amid portfolio rebalancing and positioning ahead of next week’s big week of USDA reports.

The unemployment rate fell to just 3.9% in December, down from 4.2% the previous month and below analyst expectations of 4.1%. This compares to an unemployment rate of 3.5% prior to the pandemic shutdown, but it is very impressive, nonetheless. The number of unemployed people fell by 483K in December – a month in which Omicron numbers were exploding higher. Yet, the number of new jobs created in December came in at just 199K, down from an upwardly revised 249K in November (+39K), and down from analyst expectations of 400K. In fact, this week’s ADP report showed that the private sector created 807K jobs in December. It should be noted that the Department of Labor’s monthly jobs report uses two separate surveys to generate its numbers. Its household survey showed strong job growth in December, while its survey of companies showed slower job growth.

The job participation rate ticked higher to 61.9% in this report, showing that more people joined the workforce during December. A breakdown of the numbers finds that the job participation rate is dropping for those 55 years of age and higher as several million people retire early through the pandemic, while the participation rate for younger people improves as various fiscal programs to put money in people’s hands expire. Average hourly earnings rose 0.6% month-on-month in December, doubling analyst expectations of 0.3% gains, and up from 0.4% gains the previous month. This puts average hourly earnings up 4.7% year-on-year in December, up from analyst expectations of 4.1%. The November year-on-year earnings gain was revised to 5.1%, up from the 4.8% initially reported. The average workweek ticked lower to 34.7 hours.

Here’s my take on this morning’s numbers. Job growth is still occurring, as the economy shows its resiliency, but the Federal Reserve is behind the curve. That means that it may need to be more aggressive in normalizing its policy. It projected the unemployment rate to be at 4.5% at the end of the year, but the rate is at 3.9%. It expected inflation to have a “3” handle, but even the most conservative measures of inflation put a “4” handle on it, and the headline inflation numbers have a “9” handle. Money moved out of the Treasury market in the minutes following the jobs report released on expectations that the Fed will need to be more aggressive – perhaps discussing plans to reduce the size of its balance sheet (remove stimulus from the economy) at its next couple of meetings. The Fed may also need to be more aggressive raising its benchmark interest rate, although I believe it will be reluctant to do so in an election year. Wages inflation is evident in today’s report, but wages are still rising slower than the current inflation rate, meaning that consumer buying power is shrinking. Yet, consumer buying power is still elevated at this point due to the trillions of fiscal and monetary stimulus that remain in the economy, which is why the Fed will likely start talking about pulling stimulus out (shrinking its balance sheet) at one of its next few meetings.

The commodities each have their own supply and demand fundamentals. The market’s job is to manage supply and demand. History suggests that the markets manage supply and demand at a lower level during times of deflation and a higher level during times of inflation. Money flows into the commodity sector as a hedge to protect portfolios against inflation during times of rising prices, while the opposite is true during times of falling prices. Commodity traders are currently digesting this morning’s report, while they’ll be listening to comments from various Fed members in the days and weeks ahead, discerning whether the Fed will be aggressive to bring an abrupt halt to inflation, or will they remain behind the curve allowing inflation to gain further momentum. That impacts their decisions relative to the amount money that they divert toward commodities. Crude oil prices hit fresh seven-week highs above $80 this morning, before pulling back following the release of the jobs report. Meanwhile, the grain and oilseed sector continues to see money flow out as portfolios are rebalanced, and ahead of next week’s big set of January USDA reports that are known for their surprises.

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Matt ZellerWed, 05 Aug 2026, 12:39

Grains & Oilseeds
Energy
Dairy
Renewable Fuels
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Matt ZellerTue, 04 Aug 2026, 12:43

Grains & Oilseeds
Energy
Dairy
Renewable Fuels
Cocoa
Coffee
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Mike CastleMon, 03 Aug 2026, 15:10

Grains & Oilseeds

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