U.S. payroll explosion in February suggests maximum employment, but tame wages By Reuters

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© Reuters. FILE PHOTO: People line up outside a newly reopened career center for in-person appointments in Louisville, U.S., April 15, 2021. REUTERS/Amira Karaoud

NEW YORK (Reuters) – U.S. employers hired far more workers than expected in February, bringing the labor market closer to peak employment, but mounting headwinds from geopolitical tensions could hurt business confidence and slow growth. employment growth in the coming months.

The Labor Department’s Jobs Report survey, closely watched on Friday, showed nonfarm payrolls jumped 678,000 jobs last month, far more than the 400,000 economists polled by Reuters had expected. . January data has been revised upwards and shows 481,000 jobs created instead of 467,000 as previously reported. The unemployment rate fell to 3.8%, the lowest since February 2020, from 4.0% in January.

MARKET REACTION:

EQUITIES: S&P e-mini futures tumbled and were last at 1.05%, compounding an early loss

BONDS: The yield on the benchmark 10-year note fell to 1.7666%; Two-year Treasury yields fell to 1.51%

FOREX: Market rose 1.06% after adding gains

COMMENTS:

LIZ YOUNG, HEAD OF INVESTMENT STRATEGY, SOFI

“The reaction here is that this was a strong jobs report. (Fed Chairman) Jerome Powell this week basically said we’re at peak jobs and that further reinforces that, if not, that actually even more maximum jobs.

“It’s basically telling the Fed that you have no excuses, other than a possible risk of contagion out of Russia and Ukraine. You have no excuses not to tackle this inflation problem.

JJ KINAHAN, CHIEF MARKET STRATEGIST, TD AMERITRADE, CHICAGO

“If President Powell went before Congress again today, I don’t think he would change anything he’s said in the last two days.

“The latest reports (on unemployment) have sometimes disappointed us a little with certain figures. This one is kind of a night out that, somewhat in terms, is really an explosive number.

“If Ukraine weren’t there, this report would tell us that the economy is pretty hot. Without Ukraine, there would likely be more pressure for a 50 basis point rate hike than there will be with Ukraine.

BRIAN JACOBSEN, SENIOR INVESTMENT STRATEGIST FOR MULTI-ASSET SOLUTIONS, ALLSPRING GLOBAL INVESTMENTS (email)

“There’s a lot to like about the jobs situation report, except that wages are still falling short of consumer price increases. With food and fuel prices rising, consumer budgets will be still under pressure. Fortunately, the consumer seemed to be in a fairly good position in this dispute.”

MICHAEL PEARCE, SENIOR US ECONOMIST, CAPITAL ECONOMICS

“The stronger than expected gain of 678,000 non-farm payrolls in February and upward revisions to previous months’ gains are another sign that the real economy has considerable momentum, with the Omicron wave having surprisingly little impact. This will give the Fed greater confidence to move forward with its planned policy tightening, but, with wage growth now stabilizing, there is arguably less pressure for officials to step up an aggressive round of rate hikes in the coming months.

“The only big surprise in this report was the average hourly wage, which remained unchanged in February, with the annual rate falling from 5.7% to 5.1%. With the composition of wage gains being broad-based, most of this deceleration appears to reflect a genuine easing of wage pressures. While this may seem at odds with the drop in the unemployment rate, job opening and quit rates and broader survey data suggest that labor shortages are stabilizing a bit, this which is consistent with the stabilization of wage growth.

SAM STOVALL, CHIEF INVESTMENT STRATEGIST, CFRA RESEARCH, NEW YORK

“There are already concerns about the Ukraine crisis and this would have put additional pressure on the Fed to be more aggressive due to the number of jobs added and the drop in the unemployment rate, which could exert a upward pressure on wage growth. But, because the average hourly wage has actually been below expectations, causing investors to breathe a sigh of relief.”

“We haven’t seen a sell-off in stock prices yet and we’ll have to see that before we can say the worst is behind us.”

“We’ve seen bond yields decline initially and are currently at 1.78% over 10 years, which has actually supported more growth-oriented sectors due to investors’ flight to safety. However, because investors turn to bonds at the same time as we see soaring oil prices, rising inflation and the expected start of a rate-tightening cycle, this also threatens a flattening of the yield curve , which is generally not a good sign for the markets.

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

“The good news is that hourly wages were actually flat and up 5.1% on an annual basis, which is still high, but today’s numbers seem to lessen that fear of wage inflation. This is something the Fed is obviously looking at very carefully.”

“It’s a strong report, there’s no doubt about it, no further increases in hourly wages suggest that the wage growth we’ve seen might come to a halt.”

“Unemployment fell to 3.8% and the participation rate rose slightly.”

“That question mark – where are all these people and why aren’t they going back to work? Now that the participation rate is increasing, it means that people are returning to the labor market. »

“It’s not a game-changer for March. Even given the current circumstances, the Fed cannot risk not raising rates. They will continue with a dovish rate hike this month, nothing that could come back to haunt them due to the geopolitical situation.

“The key now is the price of oil. If the price of oil continues to rise, the Fed will have to become more aggressive. Commodity inflation could reach a point where it could hurt economic growth.

THOMAS HAYES, PRESIDENT AND MANAGING MEMBER, GREAT HILL CAPITAL LLC, NEW YORK

“The number is fantastic. Even manufacturing was almost twice as good as expected, and the average number of weekly hours increased. President Powell the green light to move forward with his 25 basis point decline at the next meeting, despite geopolitical headwinds.This shows that COVID is largely in the rearview mirror, the recovery is robust and while we are going through geopolitical headwinds, this economy can roar.

“The most important thing in this report is that the average hourly wage has been much lower than expected. We are seeing the base effects starting to kick in and people who are fearful of inflation are going to start seeing some relief in the coming years months as the supply of labor comes to market we have seen the labor force participation rate increase this is going to leave some of the pressure on the prices of wages and inflation figures overall should start to improve in the coming months…we may see some relief in prices and wages by summer.”

“But the key issue is the average hourly wage, which provides relief to anyone worried about inflation. Overall the recovery is robust, COVID appears to be waning and we are starting to get numbers that show moderation of inflation.

CHRIS ZACCARELLI, CHIEF INVESTMENT OFFICER, INDEPENDENT ADVISOR ALLIANCE, CHARLOTTE, NC

“It’s a very strong report. It’s going to be overshadowed by events in Ukraine and another sign that the labor market is hot and the Fed needs to move faster to start raising rates,”

“There is no doubt that we have a boiling labor market and high inflation. Regardless of what happens in Ukraine, the Fed needs to act quickly.”

(Compiled by the Global Finance & Markets Breaking News Team)

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