Mixed data from the US labor market

On Friday, the market was buzzing with the publication of data on the American labor market. The results were mixed. Stock indices ended the day in negative territory and the Nasdaq Composite lost 1,2%.

The EUR/USD rate increased after the publication to 1,0980, but ended the day at a slightly lower level. Yields of American bonds fell, but in the second part of the day they reduced part of this movement. The market had a problem with a clear interpretation. Today morning bitcoin price exceeds the level of 71 thousand USD.

Less representative survey results

Employment in the US non-farm sector increased by 275 in February. people, which is more than expected (consensus 200). However, the January level was revised down by 167. The unemployment rate increased from 3,7 percent. up to 3,9 percent (forecast 3,7%). Average hourly earnings increased by only 0,1%.. month to month, and the year-to-year indicator decreased from 4,4%. 4,3%.

Today's jobs report once again shows how important it is not to place too much weight on individual monthly data, especially since they are often subject to significant revisions. Four weeks ago, for example, the January jobs report surprised with a huge increase in new jobs, while hours worked were weak and wages rose sharply. Now the employment growth in December and January has stayed revised down to 229 and 275 respectively (instead of 333 and 353 thousand), while the number of hours worked was revised upwards in both months and wages were revised downwards.

The increase in the unemployment rate, which is based on a less reliable survey of private households, is equally surprising this time. The variable data may reflect the fact that response rates in the relevant surveys have dropped significantly, making the results less representative.

The Fed can wait

The general picture of the labor market indicates a fairly stable situation. There are no alarm signals, so the vision of a recession is unlikely at the moment. The situation is slightly worsening, but the process is moderate and progressing very slowly. Recently released data on job vacancies (continuing a slight decline) and job attrition rates (returning to pre-pandemic levels) also indicate further normalization in the labor market.

The Fed may therefore wait for further data before initiating expected rate cuts. The central bank has no reason to act faster at this point, but on the other hand there are no arguments for moving the start of easing monetary conditions much into the future. The market is currently valuing it at approximately 65%. there is no chance that June will bring the first reduction and currently there are no reasons to assume a different scenario.

Today the macro calendar is poor. There are no items describing the state of the American economy. Investors are waiting for Tuesday's data CPI, which will show the dynamics of consumer price growth in February.

Source: Łukasz Zembik, OANDA TMS Brokers