On the February Jobs Report

Another payroll beat for February, on the shoulders of only very modest downward revisions to January’s blockbuster. While a banking crisis suddenly emerges, this jobs report offers Powell some perfect reasons for constraining the March FOMC’s hike to just 25bp. It is similar to the Bank of England’s September gilts crisis, that forced them to resume quantitative easing. The unemployment rate rose, but not because employment fell – because the labor force expanded, implying the loosening of labor market conditions Powell is looking for. This is ratified by the modest gain in average hourly earnings, following downward revisions to the two prior months. And job openings, Powell’s leading evidence of labor market tightness, fell sharply in January, on top of upward revisions to the last four years’ data. The bank crisis puts to the test our proposition that the economy is a “house of brick,” invulnerable to the shock of Powell’s huffing and puffing.