Good news! The economy added 313k jobs in February!
Like all news, we need some kind of reality check first. Did it really? The long and short of it is that, as always, the ADP employment report is less noisy and thus more accurate. It had a gain of 263k jobs in February, which is probably the right number. Still very good news all around.
But is good news actually bad news? Along with the jobs report we have the increase in wages, which stands at a modest 2.6% over the last year. Does that mean inflation is tamed? We will see what the markets think.
One of the terrible things about financial news is how ridiculously impersonal everything becomes. Something like 263k people now have jobs, and they are probably elated. It’s worth noting, as we have not done in too long, that headline unemployment or U3 is still at 4.1% and the pool of “marginally attached” people seeking work is still 1.6 million. These new employees came from nowhere, as far as the statistics are concerned.
This shows how the big numbers are hiding a lot of people who are still looking for work.
To make things even more impersonal, the reaction in various markets is often the most important part of these news announcements. Sad as that is, we cannot even be sure what it will be in the long run. Wall Street initially cheered the announcement, given that wage inflation seems relatively tame and there is no new pressure on the Federal Reserve to raise rates.
We don’t have a good handle on just what the Fed is looking for in terms of inflation, however. Here is a snapshot of the “Inflation Dashboard” at the Atlanta Fed:
Is there inflation? In terms of labor costs, retail prices, and producer prices there is. Expectations and the money supply are not showing signs of expansion. It seems that for this particular guage to change the most an expansion in M1, the money supply, would have the biggest effect.
But to watch the stock market longer term, Barataria has its eye on the 10yr Treasury Note yield more than anything. The immediate reaction to this news was a spike back up to 2.9%, picking up some of the retracement that occurred when Trump announced his tariff plan. It’s still some distance from 3.0%, however.
How have we been doing through the first part of this big week? Not badly. Things are coming in with just the right level of good news to not be bad news. A lot still depends on how this develops, but so far it’s been a better week than we might think.
Stay tuned, however. There is still a lot of peril out there.