February 7, 2020 Headlines

Treasury yields are higher and equity futures are lower despite a fairly robust January jobs report. There still remains general concern in global markets with regard to the coronavirus outbreak, but today’s price action in fixed income and Treasuries is likely attributable to some short covering as well.  Nonfarm payrolls grew by 225,000 jobs in January, 60,000 more than expected and up from 147,000 the prior month. The headline unemployment rate ticked up to 3.6%, but the move was attributable to a 20 bps increase in the labor participation rate to 63.4%, the highest level since June 2013. This is typically considered a “good increase” in the unemployment rate because it is driven by an increase in new workers in the official labor force, which generally occurs when people perceive the job market and overall economy to be good.  Household employment did decline in January, which also contributed to the increase in unemployment, but it depends to be a more volatile figure relative to nonfarm payrolls (different survey methodologies). Wage growth was slightly below expectations at 0.25% month-over-month (0.3% expected), but the year-over-year rate exceeded expectations at 3.1%.

The market response is somewhat surprising, but it’s not unusual to see an “irrational” reaction in the early aftermath of a jobs report. Some are also pointing to the fact that corporate earnings have been disappointing this cycle to justify the muted response to the jobs report. Regardless, it appears that the labor market remains very healthy in the aggregate, which is not likely lost on Fed officials.

Jason Haley
Chief Investment Officer

2/7/2020Revisions: Establishment Survey
2/7/2020Change in Nonfarm Payrolls165k225k145k147k
2/7/2020Two-Month Payroll Net Revision7k
2/7/2020Change in Private Payrolls155k206k139k142k
2/7/2020Change in Manufact. Payrolls-2k-12k-12k-5k
2/7/2020Unemployment Rate3.50%3.60%3.50%
2/7/2020Average Hourly Earnings MoM0.30%0.20%0.10%
2/7/2020Average Hourly Earnings YoY3.00%3.10%2.90%3.00%
2/7/2020Average Weekly Hours All Employees34.334.334.3
2/7/2020Labor Force Participation Rate63.20%63.40%63.20%
2/7/2020Underemployment Rate6.90%6.70%
2/7/2020Wholesale Inventories MoM-0.10%-0.10%
2/7/2020Wholesale Trade Sales MoM0.10%1.50%
2/7/2020Consumer Credit$15.000b$12.513b


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