Wednesday, March 8th, 2023
The first of this week’s important labor force reports is out ahead of this Hump Day opening bell. Automatic Data Processing ADP says +242K new private-sector jobs were created in the month of February. This is higher than the consensus +205K expected, and even higher than the upwardly revised +119K reported the previous month. Pre-market futures initially sank marginally on the news, but have since buoyed back into positive territory.
Goods-producing jobs reached +52K for the month while Services made +190K — more or less in line with normal-month ratios. Large companies (>500 employees) grew the most: +160K on the month, with medium firms (50-499 employees) filling +118K positions. Small businesses continued to demonstrate their relative difficulty in drawing workforce, with fewer perks to offer, etc. — they reported a negative -61K last month.
For the most part, the usual suspects led the way by sector: Leisure/Hospitality brought in another very strong +83K, although another typical monthly leader, Professional/Business Services, lost -36K jobs for February. The other top gainers were Financial Services at +62K and Manufacturing, somewhat surprisingly, +43K. Construction jobs, on the flip side, were down -16K on the month.
Of course, this still counts as “good news is bad news,” as the median change in annual pay were still very high in February: +7.2% for those who remained at their current jobs, +14.3% for those workers who made a change. These are clearly inflationary figures, and it’s clear the Fed’s war against inflation has yet to emerge victorious on this battlefront. The 2-year bond rate just tipped north of 5%, while the 10-year is currently in the +3.9% territory — the widest margin since the yield curve inverted nearly a year ago.
We also do not expect any changes in what Fed Chair Jay Powell has to say before the U.S. House Financial Services Committee this morning, having appeared before the Senate Banking Committee just yesterday. Powell’s testimony is directly related to yesterday’s relatively steep sell-off; these ADP private-sector payroll numbers today did nothing to change his perspective. Had the headline figure come in only half the number of jobs expected, he might have added an extra phrase or two that hedged his present position as a hawk determined to twist the Fed funds rate up to +5.5%.
But that pre-market futures are handling this information well demonstrates that coming to terms with 5-handles on T-bill and interest rates is underway. More jobs, after all, may lend toward an inflationary environment, but more jobs is also a deterrent to recessionary conditions, at least in how we usually associate them. We’ll also get a look at JOLTS data later this morning, which is expected to show job openings coming down to a still-too-high 10.6 million for the month of January.
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