Vital Statistics:
Stocks are flat after a weaker-than-expected jobs report. Bonds and MBS are up.
Jerome Powell will be speaking at the University of Chicago at 12:30 today, just before the Fed enters its quiet period ahead of the March FOMC meeting.
The economy added 151,000 jobs in February, which was a touch below the Street expectation of 160,000. The unemployment rate ticked up to 4.1%, which was above street expectations of 4.0%. Private payrolls rose 140k, while the increase in average hourly earnings rose 0.3% versus 0.5%.
The labor force participation rate declined to 62.4% and the employment-population ratio fell to 59.9%. We saw job gains in health care / social assistance, construction, and finance, while payrolls fell in retail and leisure / hospitality. Government payrolls increased, surprisingly.
Overall, the jobs report was not as bad as feared (the “whisper number” on payrolls was 120k), and it shows the economy is not falling off a cliff. I suspect we will see the DOGE layoffs reflected in the next report.
The bond market initially sold off on the report, but yields worked their way lower as the markets digested the data. The report wasn’t bad enough to bring the March meeting into play for a rate cut, but a cut by June is a 90% probability. The December futures see 3 rate cuts this year as the most likely scenario, with 4 being the next most likely.
The March dot plot will be interesting, particularly around the long-term Fed Funds rate, which will give us an idea of how far the Fed needs to go in order to get to neutrality.
Mortgage delinquency rates fell in February, according to the ICE Mortgage Monitor. Foreclosure starts increased as the VA moratorium expired. The average homeowners insurance premium rose by 14%, or $276 which was the biggest increase since 2013.
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