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Saturday, 7 March 2020

Payrolls beat again, but...

Payrolls beat again

Arguably one of the least important US payrolls ever for markets overnight, as the Bureau of Labor Statistics reported what was happening last month in the US economy. 

Interestingly, the headline result was tremendously strong for February, with employment up +273,000, and upwards revisions totalling +85,000 for the preceding two months.

The 3-month average gain jumped to +243,000 as the economy added jobs for a record 113th consecutive month. 

The unemployment rate fell to the equal lowest level since the 1960s at 3.5 per cent (and has been hovering at 3.5 or 3.6 for the duration of the past six months), with the participation rate holding steady at 63.4 per cent. 

Average hourly earnings growth slowed from 3.1 per cent to 3 per cent for the year to February, albeit continuing to outpace inflation as has been the case for the past seven years.   

Recession risks looming

But all of this is very much yesterday's news, with financial markets moving spectacularly in recent days as the recession risks mount.

The real yield on 10-year US Treasuries fell to a 40-year low overnight at -1.5 per cent, with inflation expected to fall due to lower oil prices and the gathering demand shock. 

The 10-year yield fell below 0.75 per cent for the first time on record, and US mortgage rates are also now closing in on record lows. 

Markets now expect the Fed to cut by a further 50 basis points in March, following on from the emergency 50 basis points cut the other day.