Looking towards Friday’s March jobs report, the consensus is currently for a 65k increase in non-farm payrolls versus February’s actual reading of -92,000 and January’s +126k. I strongly suspect that January’s number overstated the strength while February overstates the weakness. January’s reading was taken in the best week for weather in the first two months of the year, so there were more construction workers doing a job than you would normally expect. Likewise, February was taken when the weather was very cold and there was lots of snow disruption – remember you are only calculated as being employed if you are actually working that day. There was also quite a bit of strike action going on that will reverse in the March figures (Kaiser Permanente’s 31,000 staff in California and Hawaii have now returned to work). As such, the March figure will look stronger than the true situation.
The main point I would make is that if the jobs market had stalled when the economy was looking in decent shape before the Middle East conflict got underway, an overlay of heightened geopolitical, economic and market angst is not going to incentivise business to suddenly start hiring now. Hence, this is why we still feel the Fed is more likely to cut than hike interest rates. There is a lack of demand impetuses to create a repeat of 2022 when a supply shock combined with a demand shock (4.5mn jobs added in 2022 alone, wage growth of 6%, stimulus checks, record savings levels, post-pandemic pent-up demand) to push inflation close to 10%. Instead, this time around, we see the oil price move as being demand destructive in that it reduces spending power for discretionary items.