| Interest Rate Market Snapshot | ||||||
| Federal Funds | SOFR | 2Y Treasury | 5Y Treasury | 7Y Treasury | 10Y Treasury | |
| 4.33% | 4.34% | 3.90% | 3.98% | 4.10% | 4.22% | |
The job market is good enough for headlines, but cracks widen
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I’m a bit late to the party, but can’t skip over my favorite topic: jobs
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Last week’s release of the February jobs report had results all over the map. In an interest of time, here are the takeaways:
SOURCE: bloomberg
The Good
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The US economy added another 151k jobs last month. Slightly below estimates but a healthy number nonetheless
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Job gains were more broad based than in months past:
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Manufacturing (+10k), Trade and Transportation (+21k), Financial Activities (+21k), and Education & Healthcare (+73k)
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Notably, Construction added 19k jobs despite the headwinds faced with current immigration policy and home sales near record lows
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Average hourly earnings ticked up to $35.93, a 0.3% monthly improvement and yet another 4.0% annual increase
The Bad
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The unemployment rate moved higher to 4.1%
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Historically low, but under the surface we had 588,000 people drop out of the employed population and 546,000 people drop out of the labor force completely
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Alternatively, if those people were counted as “unemployed” vs “not in the labor force”, the unemployment rate would have jumped to 4.5%
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The U-6 unemployment rate (a rate the captures this “marginally attached” cohort of the workforce) picked up this difference and jumped from 7.5% to 8.0% last month
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Excluding the COVID era, this is the highest U-6 unemployment rate since 2018-2019 and the lows of 2006
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The Ugly
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Leisure and hospitality lost 16k jobs, temporary help services lost 12k jobs and retail trade lost 6k jobs – all generally viewed as leading indicators on the underlying health of the consumer and spending in the services sector
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The Federal workforce shrank by 10k people last month, a DOGE impact that was not expected to be seen until the March report. If this is a sign of whats to come, then the job market could slow considerably from here
sourcE: bloomberg
source: bloomberg
All-in: If you had closed your eyes and ears over the past month, last week’s report would seem like business as usual—the job market is slowing but not collapsing, and the outlook remains bleak. I've been on the pessimistic side of this narrative for some time, and I see no reason to expect improvement in the coming months. The toxic mix of federal government layoffs, public spending cuts, and tariff-related inertia will keep uncertainty front and center for both markets and employers. As a result, we may be facing both upside inflation risks and rising unemployment risks. Yet, the Fed remains in no rush to act, making the rate cuts currently priced into swaps a borrower’s best friend.
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After the report, Powell said: “The costs of being cautious are very, very low…The economy’s fine. It doesn’t need us to do anything, really. And so, we can wait, and we should wait.”
source: bloomberg
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