February Jobs Report – We’re Finally Here, but Where Are We Going?

Well, we’re here! Friday’s job report indicates that 235K jobs were created. The first full job report under President Trump beat many expectations and is both roughly in line with the 3-year average and slightly above the 3- and 6-month averages. Almost every sector of the economy added jobs except the retail sector, which Barclays believes is due to ecommerce pressuring the traditional brick and mortar retail sector of the economy. It’s been a long road. We are now in the third longest economic expansion on record, and the FOMC looks poised to raise the federal funds rate at its meeting this week. The unemployment rate sits at 4.7%, a tick lower than last month, and the labor market appears sufficiently tight to create some wage pressure. Average hourly earnings for all employees increased 2.8% year-over-year, which is consistent with the last few years. But where are we going? A bullish economic case is one where the current job growth trend continues and monetary policy stimulus is replaced with fiscal and regulatory stimulus that would continue the economic expansion. The bear economic case is filled with domestic and foreign political uncertainty, which could upend the current positive economic trends and delay any fiscal and regulatory stimulus. Both scenarios seem equally likely. In this environment SNWAM is maintaining our current risk profile across all strategies, but keeping an open mind about selectively adding credit risk where we believe we can be appropriately compensated.

Source: Barclays Research, WSJ, Bureau of Labor Statistics and SNWAM