February Jobs Report Strength

    Last week the Bureau of Labor Statistics’ nonfarm payrolls data release showed continued labor market strength as a net 236k jobs were added in February, pushing the three month average up to 203k.  The gains were broad based across the private sector, and the unemployment rate fell to 7.7%, which is the lowest level in over four years.  With these types of gains, if the labor force participation rate stays constant and the labor force continues to grow at roughly the same pace, the unemployment rate could fall to 6.9% by the end of the year and 6.5% by this time next year according an article in the Wall Street Journal.  Wages were up 0.2% month over month and 2.1% year over year, potentially pointing to an increased ability for consumers to spend more and drive economic growth.  In addition to an improving labor market, household net worth rose $1.7 trillion in the fourth quarter of 2012 to its highest level since the third quarter of 2007, mainly on the back of rising home prices and stocks.  There are still reasons to be cautious, as we have seen spurts of strength before that have not been sustained, and the total number of unemployed remains quite high at 12 million people.  We are  focused on the increasing number of positive indicators domestically and will continue to look for sustainability in this trend before changing our near-term outlook for interest rates.