Once again, the Labor Department's monthly employment report lived up to its reputation of providing a surprise in one direction or the other.
The economy created only 74,000 new jobs in December compared to the consensus forecast for 200,000.
No one saw that coming, and the bull/bear debates over what it means have begun.
Most economists have it that the plunge in jobs is not a negative since the cold weather in December obviously affected hiring. (Is it not just a bit odd that they were not able to factor that "obvious" weather situation into their forecasts prior to the report?)
Yet in spite of such a substantial drop in new jobs, the report also showed the unemployment rate unexpectedly plunged significantly, from 7.0% to 6.7%, compared to forecasts that it would tick up to 7.1%.
And analysts have it that the big drop in the unemployment rate is not a positive since it was due to a big decline in the "labor force participation rate," as another large portion of unemployed workers stopped looking for work.
One result of the report that is not debatable is that it creates a problem for the just confirmed new chair of the Federal Reserve.
It had looked like Ben Bernanke had brilliantly prepared an easy transition period for Janet Yellen.
The Fed's two main concerns, the jobs picture and inflation, were cooperating, jobs in a recent resurgence, inflation remaining benign. Additional positive reports encouraged the Fed to take a chance that the anemic economic recovery was launching into significant growth. As his final act as Fed Chairman, Ben Bernanke announced the nervously awaited tapering back of the Fed's five years of massive QE stimulus.
Markets accepted the decision as a positive, as the Fed's confirmation that the economy is indeed getting back on a fast track.
It also seemed to pave the way for Janet Yellen to enjoy a lengthy honeymoon period, needing only to implement the decision already made by the Bernanke Fed to reduce the stimulus by $10 billion a month into the summer.
The stock market loved the expectation of clear-sailing economic conditions, and no surprises from the Fed at least in the first half of 2014, while safe havens like gold and bonds remained out of favor, no longer seen as needed hedges.
The dismal jobs report rained on that benign clear-sailing scenario by raising a serious question.
Was it perhaps confirming recent warnings from the housing industry in the form of plunging mortgage applications, and from the auto industry in the form of significantly slowed December auto sales, that the economy may still be on shaky ground?
The report will force the Yellen Fed to at least consider that possibility, and perhaps slow the tapering process, which Bernanke had indicated it would do if ongoing economic reports disappointed sufficiently.
Market reactions to the report have been interesting.
The safe havens of bonds and gold have been surging higher, up 1.2% and 1.5% respectively. European stock markets rallied nicely after the report, the Europe Dow closing up 1.2%.
Emerging markets are also surging, up more than 1.5%, hopeful the report will force the Fed to taper the global liquidity it is providing even more slowly.
Meanwhile, the U.S. stock market, which was sure it knew what was going on in the jobs picture and the economy, seems not sure how to react.
The report has brought a degree of uncertainty back into the picture, with a return to watching the Fed, with its new chair Janet Yellen, for hints of what it is thinking. Perhaps not a good time for that just as the fourth quarter earnings reporting period begins, adding its own uncertainties.
It does play into my expectation that favorable seasonality and the support of the Fed will keep the market positive until April or May, but with the potential for a short-term correction first to alleviate the short-term overbought conditions and cool off the extreme bullish investor sentiment.
In the interest of full disclosure, I and my subscribers have substantial positions in the U.S. market via the SPDR DJIA ETF, (DIA), as well as in emerging markets via the VanGuard Emerging Markets ETF (VWO) and the iShares Mexico ETF (EWW).