Wall Street Reacts To “Mixed” Jobs Report

So this morning’s jobs data was, well, not very exciting.

The headline print missed expectations and the unemployment rate ticked up, but it appears it would have taken a disappointment orders of magnitude larger to rattle increasingly ebullient markets.

Or maybe it’s just that, as one strategist suggested early Friday, investors are reluctant to position ahead of the first days of the Trump administration (which is ironic because it was just two days ago when traders were saying investors were reluctant to position ahead of the jobs report).

Anyway, it was a “nothing to see here” moment for the most part, but for those interested in how the Street is digesting the numbers, here’s a rundown from Bloomberg.

Via Bloomberg:

  • BNY Mellon (Marvin Loh, interview)
    • Employment report was very close to consensus, showing a job market that’s on “firmly solid” footing; takes comfort that there was more hiring in manufacturing than expected and earnings appear to be starting to firm
    • Report had “something for everyone”
    • USD should continue to reverse some of recent losses, as report didn’t do anything to shake broad themes driving strength
    • Read more
  • Deutsche Bank (Alan Ruskin, note)
    • Data support theory that Yellen is done letting the economy run hot, while “the market is still erring too dovish on policy in 2017 and 2018” and “has tended to take a very complacent view on inflation”
    • U.S. may need strong USD to counter inflationary pressure, contrary to dynamic last year when strong dollar was seen as exacerbating deflationary pressure at home and abroad
    • Read more
  • Westpac (Richard Franulovich, interview)
    • Jobs report “should be dollar-positive”
    • Jobs growth is good enough and wages are on fire”
    • Data back the case for 3 Fed rate increases this year, but markets are pricing in only 2
  • BofA (Michelle Meyer, interview)
    • While the headline number for U.S. nonfarm payrolls was below consensus, the prior two months showed net positive revisions; jobs report “strong”
    • Recent wage data suggest a sustained trend higher
    • Expect FOMC to raise rates once this year, in September
    • Read more
  • Evercore ISI (Krishna Guha, note)
    • While Dec. NFP data was a “mixed bag,” the employment report edged up “the likelihood that the Fed will raise rates again before June”; hike in June remains base case
    • Yellen will be mindful of restraint from rise in USD and UST yields and ‘‘anxious not to jump the gun on fiscal stimulus’’; even so, many FOMC participants are probably ‘‘edgy’’ at prospect of ‘‘slipping behind the curve’’ just as economy may be recipient of potentially large fiscal stimulus
    • Read more
  • Goldman Sachs (led by Jan Hatzius, note)
    • Data roughly consistent with economic forecasts; view June as most likely timing of next FOMC increase (35% chance Fed moves at March meeting) and see 3 rate increases in 2017
    • Wage tracker now at +2.9% y/y in 4Q, up from +2.8% in 3Q
  • CIBC (Royce Mendes, note)
    • While NFP rose by below-consensus 156k, net revisions and solid rebound in wage growth ‘‘more than offset that disappointment”
    • “It wasn’t a barnburner, but it will do”
    • Read more
  • Saxo Bank (John Hardy, interview)
    • “This was a solid report if we look at earnings coming roaring back. As long as payrolls stay above 100,000 to 150,000 on average and earnings pull higher, the reflation/more Fed hike story is intact”
    • “Real interest rates are a focus for a positive USD outlook – that has been the theme since Trump elected and will remain so for a time”
  • Barclays (Rob Martin, Michael Gapen, note)
    • Report was softer than expected; weakness in services employment offsets some of the optimism from rise in manufacturing employment
    • In near term, expect “aggressive” fiscal stimulus to offset recession risk, effectively extending labor- market cycle
  • Bank of Tokyo-Mitsubishi (Chris Rupkey, note)
    • U.S. economy has “hit the wall” of full employment; wages should “really start to jump”
    • “We honestly don’t see a role for monetary policy to play at this stage of the business cycle”
    • Fed will raise rates two or three times in 2017 unless there’s early change in central bank’s management; “hard put to think of a reason why Yellen would pick up the pace”
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