Jobs Report Blows Expectations Out Of The Water

The Bureau of Labor Statistics released employment data for the month of February, and the jobs report blew expectations out of the water.

Here’s a rundown of everything you need to know.

What You need To Know

• The nonfarm payroll number came in at +313,000, and the private payroll number was +287,000. Both numbers were blowouts, topping consensus economist expectations of +205,000 and +195,000, respectively.
• The unemployment rate remained at 4.1 percent, missing the consensus target of 4.0 percent.
• The so-called “real” unemployment rate, which factors in those out of the workforce and those who are underemployed, remained steady at 8.2 percent.
• Manufacturing payrolls were up 31,000, well above the consensus target of 17,000. The construction industry added the most jobs of any industry on the month, adding 61,000 new positions.
• Wages increased just 0.1 percent month-over-month in February, missing the consensus target of 0.2 percent. Wages are up 2.6 percent in the past year.

Markets React

Investors breathed a sigh of relief following Friday’s report, as the numbers suggest the economy is on firm footing but inflation seems to be in check for now. Fears over ramping inflation sent the Dow tumbling 666 points on the day of the January employment data release. Investors seem to believe the February numbers will keep the Fed on track to raise interest rates slowly and steadily.

Expert Take

Bankrate senior economic analyst Mark Hamrick said there was both good news and bad news on the wages front. 

"The gain in average hourly earnings of 2.6% over the past year is less-than-stellar for workers, but also helps to calm inflation fears," Hamrick said. "Having said that, if we see the February payrolls number sustained, which seems unlikely, that keeps the inflation question very much in play."

Hamrick said the Fed now has the green light for a March rate hike.

"Barring the truly unforeseen between now and then, the Federal Reserve remains set to raise interest rates at this month’s meeting," he said. "Once we get past that initial likely announcement, more important are the signals about the future trajectory of interest rates."

RSM chief economist Joseph Brusuelas said lackluster wage growth may not be enough to deter the Fed from a foourth rate hike in 2018

"The 313,000 job gain is more than triple that necessary to meet the demand of new entrants into the work force, which if it sustained will continue to put downward pressure on the unemployment rate," Brusuelas said. "This will not be lost among a FOMC that leans hawkish in 2018 and points towards an increasing probability that the central bank will hike rates four times this year."

Price Action

Here’s a look at the market’s initial reaction to the report:

• The SPDR S&P 500 ETF Trust SPY was up 0.5 percent.
• The SPDR Gold Trust (ETF) GLD was down 0.4 percent.
• The iPath S&P 500 VIX Short Term Futures TM ETN VXX was down 1.6 percent.
• The ProShares Trust Ultra VIX Short Term Futures ETF UVXY was down 2.7 percent.
• The Credit Suisse AG VelocityShares Daily 2x VIX Short Term ETN TVIX was down 3.5 percent.

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