Good Friday AM,

We can always count on the jobs report for volatility, we are seeing some pretty big swings today (mostly in our favor, for now).

The report had a bit for everyone. More jobs created than expected (311k on expectations of 225k) but the unemployment rate ticked up higher than expected with wage inflation lower than expected. Including a piece from CNBC below. I am wading thought the details, but I would expect we had more people enter the workforce which accounts for the higher unemployment and lower wage pressure. We lost 3mm people in the workforce since Covid, some are clearly finding their way back. The Fed is more focused on the unemployment rate as it better describes the tightness in the labor market than does the headline hiring number. With that, the 10yr has dropped to 3.75% and mortgage bonds are through two lines of resistance. Let’s see if we can hold them as it would be typical on any day that spikes in either direction to pare back those moves by 50%. Stocks for the most part just slightly lower. Bitcoin has lost 15% in two days and looks to be heading below 20k again. SVB (Silicon Valley Bank) failed this am which is adding to the worries in the market and additional fall out. Small community banks which have outsized exposure to tech are in jeopardy.

From CNBC:

• Nonfarm payrolls rose by 311,000 in February, above the 225,000 Dow Jones estimate.
• The unemployment rate increased to 3.6%, above expectations.
• Average hourly earnings climbed 4.6% from a year ago, less than expected, in a positive sign for inflation.
• Leisure and hospitality, retail, and government led job creation by sector.

Job creation decelerated in February, but was still stronger than expected despite the Federal Reserve’s efforts to slow the economy and bring down inflation.

Nonfarm payrolls rose by 311,000 for the month, the Labor Department reported Friday.

That was above the 225,000 Dow Jones estimate and a sign that the employment market is still hot. The unemployment rate rose to 3.6%, above the expectation for 3.4%, amid a tick higher in the labor force participation rate to 62.5%, its highest level since March 2020. The survey of households, which the Bureau of Labor Statistics uses to compute the unemployment rate, showed a smaller 177,000 increase. A more encompassing unemployment measure that includes discouraged workers and those holding part-time jobs for economic reasons rose to 6.8%, an increase of 0.2 percentage point.

There also was some good news on the inflation side.

Average hourly earnings climbed 4.6% from a year ago, below the estimate for 4.8%. The monthly increase of 0.2% also was below the 0.4% estimate. Though the jobs number was stronger than expectations, February’s growth represented a deceleration from an unusually strong January. The year opened with a nonfarm payrolls gain of 504,000, a total that was revised down only slightly from the initially reported 517,000. December’s total also was taken down slightly, to 239,000, a decrease of 21,000 from the previous estimate.

The jobs report likely keeps the Fed on track on raise interest rates when it meets again March 21-22.

But traders priced in less of a chance that the central bank will accelerate to a 0.5 percentage point increase, dropping the likelihood to 48.4%, or about a coin flip, according to a CME Group estimate.

“Perhaps the best news from this report was the easing of wage pressures,” said John Lynch, chief investment officer at Comerica Wealth Management. “A drop in the largest costs for businesses is a welcome development. Nonetheless, 50 basis points is still on the table for the March policy meeting, given recent economic strength and dependent on next week’s [consumer price index] report.”

Leisure and hospitality led employment gains, with an increase of 105,000, about in line with the six-month average of 91,000. Retail saw a gain of 50,000. Government added 46,000, and professional and business services saw an increase of 45,000. But information-related jobs declined 25,000, while transportation and warehousing lost 22,000 jobs for the month.

“It’s no longer accurate to say without reservation that the labor market is a bright spot in the economy. From 35,000 feet, the picture still looks sterling, but digging an inch beneath the surface, there are clear pockets of softening,” said Aaron Terrazas, chief economist at jobs review site Glassdoor. Terrazas noted that hiring has slowed in “risk-sensitive” sectors. He added that, “The challenge for policymakers is that these weak points are a small part of the overall economy, but potentially have linkages lurking that have yet to emerge.”

Please remain safe and stay healthy. Have a great weekend and make today great!