On the January Jobs Report, and US Services PMI

A blockbuster payroll number, but full of ambiguities. Without the seasonal adjustments there was a large contraction. The “payroll survey” was distorted by annual benchmarking changes, and the “household survey” by annual population controls revisions. The benchmarking changes revised the total number of payrolls up sharply, but the 517,000 gains reported this morning already take that into account. The population controls revisions upwardly distorted the number of employed persons considerably. But abstracting from all that, it was a positive month, and recessions don’t start until there are negatives. Even temporary payrolls gained. Hourly wages rose less than last month, despite large payroll gains. We think this will have little impact on the Fed, and reiterate our call that Wednesday’s rate hike was the last in this cycle.