Thread by @RickRieder

Today’s #JobsReport was very solid, but like is often the case in the movies, it’s very hard for the sequel (today’s report) to match such an unexpected hit (January’s revised 504,000 jobs gained).

Still, a nonfarm #payroll gain of 311,000 jobs is quite good and having 815,000 jobs created so far this year after the #economy has already created 12 million #jobs over the past two years is pretty amazing in its own right.

Further, the 3-month moving average of 351,000 jobs, after a 12-month moving average of 362,000 jobs gained per month is also pretty remarkable, particularly after the market-implied pricing of the terminal #FedFunds rate has move up 500 basis points (bps) in a year.

The #unemployment rate increased to 3.57%, which is just about its average level over the past year, but remains impressive after such #policy execution…

…including an ending of quantitative easing (#QE), the beginning of balance sheet runoff, a massive set of #RateHikes and an extraordinary #fiscal tailwind (post-Covid) that has turned into a current drag.

We have described how certain segments of today’s #LaborMarket remain very much unfulfilled, as for example in the many service-oriented roles, such as those in education, #healthcare, leisure and hospitality.

We are still arguably several hundred thousand #jobs below trend in these industries, with many companies and #businesses still struggling to locate adequate levels of labor.

One of the key dynamics at play in the #economy today, which we continue to suggest is very relevant, is that many of these areas (and hires) are less subject to #interest rate sensitivity, or broad #monetary policy (e.g., healthcare and education)…

…than the historically more cyclical sectors, such as #housing and vehicle production, which require interest rate-based #financing for sales.

Wages slowed some today, but also reflect a solid labor #market. Average-hourly-#earnings growth rose a modest 0.24% month-over-month.

The year-over-year rate of 4.62% is likely to decline in the months ahead, and overall labor #income slowed sharply from January’s torrid pace, given the slowdown in the growth of total hours worked.

However, production and non-supervisory #wages were stronger (up 0.46% month-over-month), and in general, #services sector wages held up better today than goods sector wages.

Hence, today’s report was impressive, but a sequel a bit less nail-biting than the original. That almost had to be the case after the recently jaw-droppingly high payroll numbers of the prior few months.

The #Fed needs to see more evidence of reduced demand for labor to develop a more confident read on the influence of more restrictive #MonetaryPolicy biting into income, consumption demand and consequently #inflation, and particularly the sticky-high service inflation.

Still, today’s data only provides very limited comfort, and gives no indication that the #Fed can slow its rate #hiking cycle quite yet.

Furthermore, with the #banking industry recently suffering a jab to the jaw, and #markets consequentially adjusted the pricing of Fed hikes based on the potential of greater #FinancialStabilityRisks…

…we need to keep in mind that the #Fed’s other unofficial mandate has been the maintenance of financial stability.