It’s been a volatile week for all markets in general as tensions remain high in the Middle East. Since Monday, 10yr Treasury yields are up around 23bp, the Dow Jones Industrial Average is down over 1,500pts and Brent Crude oil is up around 13$ a barrel (as of the time of this writing). With current levels of volatility, conditions were ripe for another big move this morning, as Non-Farm Payrolls, Unemployment, and Retail Sales numbers were being released and that’s exactly what happened.
Job growth plunged in February following a strong January, reinforcing concerns labor market deterioration is accelerating. February Non-Farm Payrolls unexpectedly fell by -92k (est = +55k) and the prior two months were revised lower by -69k. Job losses were fairly widespread with the largest declines in leisure & hospitality (-27k), healthcare (-19k), private education (-15k), and manufacturing (-12k) while financial activities (+10k) and other services (+8k) led gains. The BLS said at least some of the February weaknesses were due to strike activity while weather also likely played a role. Nonetheless, this was the largest drop in jobs since October and the 5th monthly decline in the last 12 months. The separate household survey showed a loss of 185k jobs and an increase in the unemployment rate to 4.4% (est = 4.3) as the labor force participation rate unexpectedly plunged to 62.0% (est = 62.5%), the lowest level since December 2021. Although some of the weaknesses in this report will be dismissed due to strikes and weather, it was an unexpectedly bad employment report across the board with widespread job losses, negative revisions, a jump in the unemployment rate, and a decline in participation.
Headline retail sales came in at -0.2% month over month which was slightly better than estimates at -0.3%. Losses were largely driven by declines in sales for motor vehicles, gas stations, and personal care stores. Online shopping saw the largest increase. Weather also played a large role in the decline in retail sales as shoppers across the country were sidelined with inclement weather.
Normally bonds would rally with this data, but bond traders are likely balancing these risks with the recent increases in oil prices as higher energy costs could feed through to inflation.
Hope everyone has a great weekend!
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Dillon Wiedemann
Senior Vice President of FSG
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