Mar 12, 2024

A Clear as Mud Jobs Report

Weekly Market Commentary

On Friday, the U.S. Bureau of Labor Statistics (BLS) reported that employers added 275,000 net new jobs in February. The hiring boom continues, right? Well, it’s not quite that simple.

Let’s dive in. January’s red-hot increase of 353,000 was revised lower to a still-strong 229,000. But that’s an unusually large downward revision. A more comprehensive review uses the 3-month moving average, which is simply an average of the last three months (Figure 1).

It smooths away much of the monthly noise. It reflects an acceleration in new jobs.

If that were the end of the story, we could conclude the labor market is solid. But the unemployment rate rose from 3.7% in January to 3.9% in February. It’s still low, but it’s at the highest reading since January 2022 (Figure 2).

How does the jobless rate rise when the number of jobs increases?

Nonfarm payrolls are derived from the Establishment Survey, a survey of businesses. The unemployment rate is taken from a separate survey called the Household Survey.

In part, more people are returning to the labor force following the pandemic; higher legal immigration may also be contributing.

Employment in the Household Survey has been down in three of the last four months (Figure 3), a notable contradiction from what has been happening to nonfarm payrolls.

It’s unclear which survey best reflects the overall state of the labor market. Over a longer period, they tend to line up.

That said, the employment number is typically more volatile in the Household Survey than nonfarm payrolls, as illustrated in Figure 3, so economists focus on nonfarm payrolls when reviewing job trends.

The job openings report from the U.S. BLS still highlights that job openings remain high. Despite a number of high-profile layoff announcements, first-time claims for unemployment insurance from the Department of Labor remain low.

Besides, much of the data doesn’t point to significant economic weakness.

Let’s let the two employment numbers sort themselves out, i.e., let’s see how this plays out.

Reproduction Prohibited without Express Permission. Copyright FDP Wealth Management. All rights reserved. Advisory Services offered through FDP Wealth Management, LLC, a state Registered Investment Advisor. Securities offered through Valmark Securities, Inc., Member FINRA/SIPC | 130 Springside Drive Suite 300 Akron, OH 44333-2431 | 800.765.5201. FDP Wealth Management, LLC is a separate entity from Valmark Securities, Inc. If you do not want to receive further editions of this weekly newsletter, please contact me at (949) 855-4337 or e-mail me at or write me at 8841 Research Drive, Suite 100, Irvine, CA 92618. FDP Wealth Management, LLC, Valmark Securities, Inc. and their representatives do not offer tax or legal advice. You should consult your tax or legal professional regarding your individual circumstances. Indices are unmanaged and cannot be invested directly in. Past performance is not a guarantee of future results.


How Do Investors Spell Relief?

Investors celebrated an ‘in line with expectations’ CPI that suggested the rate of inflation isn’t accelerating. It’s a small win, but it was enough to send the three major market indexes, the Dow, the Nasdaq, and the S&P 500 to new highs.

An Annual Ritual at the Gas Pump

You’re right if you have this nagging feeling that gas prices rise in the spring. As the graphic illustrates, on average prices rise through Memorial Day, plateau over the summer, and slip in the fall. This year is no exception, as prices echo the seasonal pattern.

Rate Cuts Still on the Table, Timing Less Certain

We often discuss the Federal Reserve and interest rates because both greatly impact investors. For starters, changes in interest rates have a significant impact on stock prices and income earned on savings. Sharply higher rates in 2022 pushed equities into a bear market.

Just Do It

That ubiquitous phrase from one of America’s most extensive athletic footwear and apparel makers seems to have been adopted by most American shoppers. The U.S. Census Bureau reported last week that retail sales jumped 0.7% in March, following a strong 0.9% rise in February.

The Road to Lower Inflation Takes a Detour

The rate of inflation is accelerating. That’s not how we hoped to start this week’s Insights. Take a moment and review Figure 1. The 4-month moving average has broken out of its long-term downward trend (red-dashed lines). On a monthly basis, prices bottomed in June and began to gradually turn higher. The upward trajectory picked up in January.