Friday Market Update: March 10th 2023

February Employment Report Starts to Show Cracks; Mortgage Rates Move Lower

Happy Friday! Brian Manning here with the weekly update. Let’s get right to it. Monday this week was a relatively quiet news day. Not a lot to report on there.

Tuesday and Wednesday of this week, we had Fed president Jerome Powell testifying in front of Congress and the Senate Not a lot of market moving information there. Pretty much said what we expected, but it does show us that they continue to make decisions based on old data. It’s almost like the Federal Reserve right now is making now is decisions like they’re driving a car, looking in the rearview mirror. Of course, the data is important and that’s something we have to look at. But the decisions that they’re making are based on old data instead of looking forward. We’re going to talk a little bit more about that here in a moment.

Wednesday this week, we also got ADP. So, first week of every month is employment week. So, the first Wednesday of every month, we get ADP employment report. They are the largest provider of private payrolls in the US. They have 25 million sample records. So, this is for the month of February. ADP had an expectation of 242,000 new jobs that would be created and we got 205,000 new jobs. So pretty much in line with expectations there. That wasn’t very market moving.

Thursday, it was a really quiet news day. And really everything was leading into today because today we get the BLS. That’s the Bureau of Labor Statistics report. This is employment data for the month of February. So… Let’s take a look at just some slides here and information we have for employment. So… First thing we look at is the establishment survey.

So, this is BLS report. Let’s call it number one. So, this showed us that in the month of February, we had 311,000 new jobs that were created. The estimation was 225,000 new jobs. So, a little bit better than expected. There are revisions to the prior month. So, the prior months were brought down by 34,000 jobs negatively. So, the net was only by 52,000 better than expected. Then we look at what’s called the household survey. So, this is phone calls to households across the country. So, household survey showed that we had 177,000 jobs created in the month of February. But what it also showed was that the labor participates participation force increased by 419,000 people.

So, this is people coming back to the employment force looking for a job. What was market moving today was to see the unemployment number. So, unemployment moved from 3.6%… I’m sorry, from 3.4% to 3.6%. So, we saw an increase in unemployment. If you watched any of our other updates in the past, you know that we always talk about a recession starting and recession start when unemployment is at its lowest. It’s not when unemployment is at its highest.

So, perhaps, we’ve seen the turning point. Maybe we’ve seen unemployment being at its lowest because here we move from 3.4 to 3.6. Also, what was really important to look at was a big jump in duration of unemployment of less than five weeks. So… This was up 343,000 people. So, this is people that come into the unemployment field.

Unfortunately, they’re not able to find new jobs and this was up by 343,000. So, it didn’t mean that the amount of unemployment was increasing significantly. What it meant was that people were unemployed and then they went into the job search mode and they weren’t able to find the job. And that was up by 343,000 people, which is an incredibly large number to see an increase for there.

Then we also look at some other data in the report. So, we had average hourly earnings from 34.6 to 34.5. This is important to look at because if you look at employers across the country and look at their employment and what they’re doing potentially instead of laying off employees, they’re declining or decreasing the amount of hourly earnings that they’re going to have per week or weekly hours worked. So that was a decline there.

We also had average hourly earnings that were only up to 2/10th of a percent. This is a very small gain and the smallest gain so far in a year. And the other thing we want to look at is just average hourly earnings. So, average hourly earnings were down just under 5/10th of a percent. This is important because this impacts wage pressure inflation. So, all these are fairly inflationary favorable numbers.

The last thing we want to look at here is just job gains in leisure and hospitality. So… Running into the pandemic, we had increases in jobs in the leisure and hospitality field. And then we had an incredibly large decline with a ten-million-person job loss in leisure and hospitality. And now we’re starting to see or we’ve seen really the jobs come back. What’s important to look at here is… the JOLTS report shows that job openings for leisure and hospitality have declined by 194,000. So, if we look at a lot of the prior employment reports, you’re seeing strong employment and one in the sector where you’re seeing very strong employment and adding of new jobs is in leisure and hospitality.

But now, we’re wondering if we’re starting to see a turning point here because if we’re seeing a turning point and now, you’re seeing, you know, almost 200,000 less jobs available in leisure and hospitality, that’s going to have an impact going forward based on the employment reports as well. Because leisure and hospitality, you know, it’s kind of… I don’t want to say running dry, but it definitely is running out of gas as far as how many people they can hire and that’s going to be impactful for employment as well.

So, all in all, I would say the report is favorable for interest rates. We’ve held tight going into this. We felt like we’ve been in a good position where we see some interest rate improvements which we have from yesterday’s closing in the markets going in today, we’re seeing improvements in rates, which is really great to see. I’m around all weekend. If you have any questions, let me know. If you want to learn how you can close the purchase transaction in twelve days, give me a call. I’d love to help you.

Happy Friday. Have a great day!



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