Financial Update For Jan. 6, 2010

• TSX +21.18 to 11,888 ending on a 15-month high
• DOW -11.94 the number of buyers who agreed to purchase previously occupied homes fell sharply in Nov. The National Association of Realtors says its seasonally adjusted index of sales agreements fell 16%. The drop was far larger than the 2% decline that economists expected. It was also the first decline following 9 straight months of gains
• Dollar +.23c to 96.25cUS touching another 2 ½ month high as the U.S. currency weakened for a second day
• Oil +$.26 to $81.77US per barrel.
• Gold +$.40 to $1,118.10USD per ounce


U.S. economy could create up to two million jobs in 2010
Paul Vieira, Financial Post
OTTAWA -- Markets might be "dramatically underestimating" how many jobs the U.S. economy will produce this year, economists at Scotia Capital said Tuesday, indicating the pace of job creation could reach levels not seen in over a quarter century.
In a note to clients, Derek Holt and Karen Cordes suggested the U.S. economy, mostly through help from the federal government, could create up to two million jobs in 2010. The bulk of this job creation, especially for the first half of this year, will be driven by U.S. government hiring to complete the once-in-a-decade census.
"The consensus is dramatically underestimating potential upsides to nonfarm employment in 2010," say the Scotia Capital analysts. "We readily admit we'll be wrong on the final tally, but if we're even anywhere close to the mark, then the main point will be that current consensus is caught flat-footed on such expectations and is off by orders of magnitude on potential job growth."
However, the analysts add the census-related jobs will disappear as quickly as they are created – resulting in steep monthly job losses in the latter half of 2010. But on net, they believe up to two millions jobs could be created in the United States in the 12-month period.
This call comes as both Canada and the United States release jobs data for December on Friday. In November, market analysts were caught offguard after data suggested the U.S. economy shed only 11,000 jobs – after 21 consecutive months of six-figure job losses. Action Economics, a U.S.-based forecasting firm, issued its own analysis on Tuesday indicating there's a chance the United States could post job growth in December.
Scotia Capital said the impact of census-related job growth would be greater this year than in the previous censuses of 1990 and 2000, as the White House will be eager to use stimulus cash to create jobs. The economists forecast that about 180,000 census jobs will be created in the first quarter and an additional 971,000 in second quarter. All those jobs will then be lost by the end of the third quarter. Most of the hiring will be concentrated in one or two months, Scotia Capital said, "such that one single month could see up to one million jobs created," likely in May.
The record single-month nonfarm job gain was September 1983 when 1.11 million jobs were created in the United States.
Meanwhile, other factors will spur job creation, most notably the impact of Washington's nearly US$800-billion stimulus package and decisions by private-sector companies to add to their payrolls.
Nevertheless, the Scotia Capital economists warn the "potential is there" for markets and policy makers to overreact to the initial job data. Of concern, they say, is that pressure will mount on the U.S. Federal Reserve to hike interest rates based on the strong data, even though it might be skewed by one-time factors, such as the census.
"[But] markets probably will and therefore heighten the risk of prematurely tightening growth drivers," they said