While the headline change in payrolls was disappointing relative to expectations, the numbers under the surface of the January report were considerably stronger. Beyond the upward revision of 100k to the prior two months of data, the dop in the unemployment rate to 4.0% was notable.
The fact that it came despite an uptick in the participation rate is indicative of strong growth in the household (unemployment rate) employment of 2.234million.
Wages jumped by 0.5% on the month, considerably more than the expected 0.3%, is also significant—that the most obvious vector through which labor market strength flows into inflation.
Finally, benchmark revisions were much less negative than originally estimated, taking down payrolls by 589,000.
Some could conclude the rise in household employment looks too good to be true, the other measures other than headline payrolls are also quite strong offering validation.
Markets on Friday agreed with the above thoughts as both the Treasury and equity markets sold off on fears of greater than anticipated growth and inflationary pressures will keep the Fed on hold for the foreseeable future.
Markets were also further spooked by the specter of further tariffs. Generally speaking, to date proposed tariffs have been only a discussion piece, not necessarily overly impacting the averages or Treasuries.
This week’s economic calendar is filled with inflationary indices. What will the data suggest? The CPI, the PPI, import/export prices, and real average weekly/hourly earnings are released. Also released is industrial production/capacity utilization as are retail sales.
Last night the foreign markets were up. London was up 0.59%, Paris up 0.23% and Frankfurt up 0.21%. China was up 0.56%, Japan up 0.04% and Hang Seng up 1.84%.
Futures are up about 0.3% even as the President has proposed more tariffs, a 25% levy on steel and aluminum imports. Oil is up about 2%. The 10-year is off 2/32 to yield 4.50%.
