Last Friday’s Strong Jobs Data

February 5, 2024

The economy of the United States is driven by jobs and housing. Friday, we received statistics concerning the former, and the numbers were a surprise to Orion’s management as well as economists in general.


A much stronger than expected non-farm payrolls report that pushed the benchmark 10-year Treasury yield up by a whopping 17 basis points to 4.02 percent, and likely killing off any lingering chance that the Federal Reserve might start cutting interest rates in March.


According to Friday’s jobs report from the Bureau of Labor Statistics, the labor market continues to grow at a robust pace, with 353,000 jobs added in January, up from December’s 333,000 and nearly twice as strong as some had forecast. It continues to indicate a healthy labor market, and most major sectors experienced job gains.


In the household survey, the unemployment rate was unchanged at 3.7 percent, and the labor force participation rate remained at 62.5 percent. Most believe that if job growth continues at such a strong pace, this could potentially result in as lower pace of policy rate cuts than what is currently expected by the market. It could also present some upside risk to mortgage rates over the coming months, which would dampen increased housing demand coming from stronger job growth.


So, unless something really unusual happens, it's settled: there will likely be no interest rate cut next month, although Fed Chair Jerome Powell signaled it could happen at some point this year. "I don’t think it's likely that the committee will reach a level of confidence by the time of the March meeting to identify March as the time to do that," he declared after the Fed maintained its policy rate at 5.25-5.50 percent yet again. " We need to seemore evidence that tells us we are on a sustainable path to 2 percent inflation."


The jobs data pushed stock markets higher and yields higher on Friday. Fed Chair Powell is concerned that the timing of any rate cut has to be “spot on” since they would not want to ease too soon. Orion’s brokers know that cutting too soon risks a return of inflation, but cutting too late can trigger an economic downturn. Once again Orion’s management is reminded of why we focus on things we can influence, like service and products, and let rates do what they’re going to do.





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