The January jobs report showing a net gain of 227,000 jobs (versus the consensus of 170,000 among economists surveyed by Briefing.com) would have been enough to send stock and Treasury bond prices down and the dollar up because the very strong job creation in January would have raised market fears that the Federal Reserve would move to raise interest rates as early as its March meeting.
Except that hourly wages barely budged and at the average hourly work week stayed stuck at December’s level. In January wages rose by just 0.1% month to month. That brought the gain for the last 12 months to 2.5%. That was lower than the 2.7% increase expected by economists surveyed by Bloomberg. The 2.5% increase in wages for the last 12 months is the slowest rate of growth for wages since August. Looking at the wage figure this morning, the financial markets are arguing that it shows there’s more slack in the labor market than you’d expect just looking at job growth and the official unemployment rate of 4.8% (up from 4.7% in December.) With the labor market still showing that degree of slack, and absent an uptick in the rate of wage growth, it’s hard to see, the market is concluding this morning, why the Federal Reserve would move in March to raise rates. The odds for a March increase, which had been near 33%, fell to 26% in the Fed Funds futures market today.
Put the numbers all together and the economy is just booming along but there’s not the kind of wage inflation that would push the Fed to raise interest rates quickly.
Welcome back Goldilocks, where the market is neither too cold nor too hot, but just right.
Yields on the 10-year Treasury were essentially unchanged this morning at 2.48%. The Bloomberg Dollar Spot Index was also unchanged, which leaves the index on track for its sixth straight weekly slide and the longest slump since August. The Dow Jones Industrial Average rose above 20,000 for the first time in a week. The MSCI Emerging Market Index climbed 0.6%, erasing its loss for the week. Gold slide 0.3% but still looked like it would climb something like 1.7% in the week.