The big story of the first week of the new year was always going to be about the December jobs number. The Wall Street consensus was +203K for Non-Farm Payrolls, but the headline number, at +223K, handily beat that consensus. As a result, the “soft-landing” narrative is back on the table. The cherry on top was the unexpected low growth in wages (+0.27% to the second decimal). Consensus was +0.4%. Perhaps the much feared “wage-price” spiral isn’t happening! And with those two pieces of data, the equity markets spiked more than 2% on Friday, January 6 (the DJIA rose more than 700 points). One would think that, since the labor market appears to be so strong, this would elicit a further hawkish response from the Fed, and that interest rates would spike higher. But the opposite occurred with the 10-Yr. Treasury yield falling more than 16 basis points (to 3.56% from 3.72% on Thursday) and even short-term rates tumbled significantly (the 2-Yr. Treasury plunged nearly 20 basis points to 4.26%). Something appears to be out of whack!
Under the Hood
We have often cautioned our readers to look beneath the headlines, especially at relevant data that the media ignores. It’s wise to do that with this particular employment data! As mentioned above, the headline Payroll number was +223K (Seasonally Adjusted).
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