Jobs jump higher while unemployment remains unchanged

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Published Date 3/9/2018

Job numbers exceeded expectations, according to the BLS employment details. Non-farm jobs in February were expected to increase 205K jobs and instead increased by 313K, and private jobs were thought to be up 195K, but were up +287K. The January private jobs number, originally reported +196K, was revised to 238K. Manufacturing jobs almost doubled what was expected at +31K against +17K; retail jobs +50K; construction jobs +61K; government jobs +26K. The unemployment rate was expected down to 4.0% from 4.1% in Jan; it stayed at 4.1%. On the inflation concerns, average hourly earnings were expected +0.2%, but increased just 0.1%, and yr/yr thought to go up +2.9%, was released +2.6%. 4 months of job growth over 200K, yet unemployment remains at 4.1%; looks like a lot of slack remains in the job markets as more people are entering the workforce. February job growth is the strongest in almost two years. The February data is so much more than economists were forecasting that it makes it difficult to square with reason; the bond market is sweating inflation but it slowed in February. Leaves me wondering whether the February numbers will be a one-off report that is faulty in some ways.

Yesterday President Trump officially set out the tariffs on China and other selected countries. The tariffs have set off major differences within the White House and the Republican party. Trump exempted Mexico and Canada for the moment. A number of global economic leaders have blasted Trump over his leaning toward protectionism. He hit markets and world leaders last week with his announcement, and fear has reigned since then. But it is unlikely Trump will follow through with more aggressive tariffs as long as he gets the fairer trade deals he espoused in his campaign. It is a fine line he walks, with some pressures potentially leading to better trade, but if he pushes a little too much the US and global economies will slow. It is going to take months to measure any lasting impacts. In the meantime, markets have begun to relax somewhat after the shock a weeks ago.

President Trump has agreed to meet with North Korea’s Kim Jong Un. If it actually happens, it would be the first meeting between a US president and a North Korean leader in about 20 years. A positive? Perhaps a ploy by Un. He will not give up his weapons program, and to expect that is folly. The general reaction we are hearing is that the US is not prepared diplomatically to conduct meaningful dialogues.

Treasuries and MBSs are under pressure this morning after a nice bounce yesterday but holding so far this morning. Strong jobs but less inflation may hold the 10, but with the FOMC scheduled to increase rates on the 21st and global growth momentum increasing, the ECB is now hinting it will be winding down its stimulus as it is difficult to forge a bullish outlook for interest rates.

Source: TBWS

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