The March employment data surprises markets

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Published Date 4/5/2024

Jobs, we got jobs. The March unemployment rates expected to be unchanged at 3.9% declined to 3.8%. NFP jobs thought to be +200K increased 303K (February revised from 275K to 270K), private jobs expected at 170K increased 232KK (February jobs revised from 223K to 207K). Average hourly earnings month/month +0.3% as expected but February revised from 0.1% to +0.2%; year/year earnings 4.1% as expected, down from 4.3% in February. The labor participation rate after sitting at 62.5% for months increased to 62.7%. Manufacturing jobs unchanged in March with forecasts of +7K, February manufacturing jobs revised from -4K to -10K. On Monday ISM reported manufacturing index at 50.3, the first index reading above 50.0, the pivot between expansion and contraction, this data calls that into question.

Payrolls increased to the highest in a year. In total the report adds to the view that the Fed will be in no hurry to lower rates, bringing more to the side of no cut in June. The economy is cooking, although so far, no trend of increasing inflation. Powell spoke Wednesday saying he saw rate declines later this year and was not inclined to react until inflation showed an easing. With today’s news showing month/month earnings at 0.3% up from 0.2% in February. This data will add to the increasing view the Fed may not cut rates in June.

The reaction in the bond markets as you can imagine, sent the 10 year note yield to its high of the last week at 4.40% (+8 bp) and initial MBS prices down 20 bps.

At 9:30 am the DJIA opened +23, NASDAQ +60, S&P +13. Not much of an opening given the data but goes to the point that the Fed may hold back rate cuts. The DJIA declined 530 points yesterday. At 9:30 am the 10 year note 4.39% +7 bps. FNMA 6.0 30 year coupon at 9:30 am +16 bps from yesterday’s close and -10 bp from 9:30 am yesterday.

The remainder of the day will be on Fed officials’ comments, there are three on the calendar.

At 3 pm February consumer credit, estimates at +$17.3B down from $19.5B in January. Our focus is on the revolving credit number, the use of credit cards.

The initial reaction to the employment report pushed MBS prices down 20 bps, by 10 am MBSs improved to -6 bps. The 10 year note on the reaction up to 4.40% +8 bps.

The fundamentals and technicals are in bearish conditions, but since employment at 8:30 am both the 10 year and MBSs have improved slightly.

Source: TBWS

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