A week later, market participants are still asking questions about an anomalous US jobs report.
The scorching NFP headline prompted Fed officials to concede (or, if you’re Neel Kashkari, to reiterate) that the peak for policy rates may need to be higher than the Committee’s doves previously expected. That, in turn, forced market pricing for the terminal rate above 5%, a meaningful development.
There are myriad questions about the jobs data, but if you ask David Rosenberg, we might be missing the forest for the trees.
In his weekly, SocGen’s Albert Edwards quoted Rosenberg who said that, “Instead of focusing on the payroll report, which was just one statistic for one month, perhaps we should be asking why it is that the level of full-time employment in the United States is lower today than it was last May.”
The version of the chart I presented above is striking — I guess. It mixes the two surveys, though.
Caveats aside, a face-value interpretation of the full-time numbers suggests the US hasn’t created any full-time jobs (on net) in seven months. To the extent that’s accurate (and who knows, right?) it’d be notable.
Meanwhile, US jobless claims rose more than expected last week, to a still-low 196,000. Consensus expected 190,000.
The four-week moving average dropped to just 189,300. Continuing claims were likewise higher than anticipated, at 1.688 million for the week of January 28.
Last week’s rise in initial claims was the first increase in five weeks. Set against a macro environment characterized by concerns over the inflationary implications of a hot labor market, the uptick was likely to be received well by markets — at the margins, anyway. Bad news is good news. You know the drill.
Claims had fallen to the lowest since April.
At the end of the day, the “problem” for markets that would love to extend 2023’s already raucous rally, is that concrete evidence of a cooler labor market is very difficult to come by.
You can nitpick the numbers, or even call into question their veracity, but that doesn’t matter if policymakers are determined to use them when it comes to setting the price of money.
“Those filing for unemployment insurance remain unquestionably low,” BMO’s Ben Jeffery said Thursday, of the claims data. “[This] does little to undermine the reality that the labor market is still very strong.”
