The highly anticipated payrolls report was forecast to show a significant improvement in the US labour market, leaving stocks stuck between a rock a hard place: a momentous increase in new jobs would send inflation fears soaring, push yields higher, and thus send stocks tumbling; meanwhile, a bleak number would backtrack America’s economic recovery mode and cause stocks to crash.
Of course, the latest BLS data did not disappoint, as the month of February recorded a whooping 379,000 additional jobs— nearly double the consensus projection. Similarly, the private payrolls data boasted even more impressive results, as a total of 465,000 new jobs were added in February, which is 45,000 more than the highest forecast of 420,000 among a total of 35 estimates received by Bloomberg.
There is however, a twist: the majority— 355,000 to be exact— of the new jobs that were added in February were in the leisure and hospitality sector. Retail trade, which has been hammered throughout the pandemic amid an e-commerce boom, saw an additional 41,000 new jobs come back. On the other hand though, employment levels in construction fell by 61,000 last month, as did the mining sector, with a decline of 8,000.
The latest data pushed the US unemployment rate down to 6.2%, and the total number of unemployed Americans to 10 million. Although both indicators are significantly below their April 2020 highs, they still remain above pre-pandemic levels recorded in February of last year. Nevertheless, the latest labour market data did not fail to send the 10-year Treasury to the highest level this year.
The yield on the 10-year Treasury soared to a high of 1.62%, before tapering off throughout the day to around 1.55%. Similarly, the 30-year Treasury yield also registered an increase, hitting a high of 2.34% before levelling out at around 2.28%. The rise in bond yields and subsequent decline in bond prices have sparked concern among economists, as fears of inflation continue to mount amid an increasingly bullish view on the US economy.
The increase in Treasury yields has lead to speculation that Federal Reserve Chair Jerome Powell would adjust the Fed’s asset buying program, and by default, initiate yield curve control. Although Powell on Thursday revealed that the Fed has been monitoring the yield curve closely, he did not provide an indication of how the central bank would proceed.
The latest jobs report data also sent stocks tumbling, especially those concentrated in the tech sector. Tesla fell by more than 4%, bringing its losses to 12% for the week. Zoom Video and Peleton, both of which have been basking in pandemic-fuelled record growth, tumbled by 14% and 19%, respectively. However, the most drastic decline has been noted in Cathie Woods’ Ark Innovation investment fund, which slid by more than 10% this week and erased all 2021 gains.
On the other hand though, stocks that are poised to benefit from the oncoming economic growth sentiment recorded notable gains following the BLS report. The S&P 500 energy sector increased by more than 3%, with Occidental Petroleum rising by nearly 6%.
Information for this briefing was found via BLS and Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.