March 10, 2023
Good morning,
The much-anticipated monthly employment numbers came out this morning. While headline job growth was an upside surprise at +311k vs +225k expected (too hot), the unemployment number rose more than expected to 3.6%, up +0.2%. That unemployment number and lower than expected wage growth trumped jobs growth, and the overall report appears to be a relief to traders. The jobs data this morning is not a hawkish one, and, looking at Fed Funds Futures, it is being interpreted as an excuse for the Fed to go +25 basis points (bps) instead of +50 bps at their next meeting as had been feared only days ago.
There are also the lingering effects this morning of a run-on Silicon Valley Bank (SVP) that dragged down markets yesterday. The US Treas 2yr yield is down -30bps in 2 days (a move not seen in 15 yrs), while sympathetic declines in small bank stocks serving Silicon Valley Tech startups are large and disruptive. There is no indication yet that this burst in a small-ish sector of our highly intertwined banking system will lead to some contagion – but we’re monitoring it. That contagion fear alone seems to be weighing on stocks this morning (Futures off -.25% pre-open) following an otherwise constructive jobs report.
Be well,
Mike