On the January Jobs Report

467,000 net payrolls flies in the face of contemporaneous labor market data, including the fact that 689,000 more persons report they are shut out of the labor force due to Covid. When “population control” adjustments are taken into account, the household survey reported a 272,000 drop in employment, and a 135,000 gain in unemployment. If payrolls are an anomaly, it may be due to seasonal adjustments – without them, payrolls would have contracted by 2.3 million. The Fed can see both the good news in the payroll survey and the bad news in the household survey. But this is not the palpably weak headline that could deflect lift-off in March. Yet hawkish rhetoric is already dialing down, and when Powell is reconfirmed he will be free to focus again on inclusive maximum employment. One risk is that Powell’s reconfirmation could be held hostage to the confirmation of Raskin, the controversial nominee for Vice Chair of Supervision.