While we are waiting for NFP numbers on Friday, in recent days, market participants have been following the ADP and JOLTs data and Mr. Powell's semi-annual monetary policy testimony to the Senate Finance Committee.
On Tuesday and Wednesday, Mr. Powell answered the questions in the Senate. Mainly he emphasized inflation and the labor market. He said that the current high inflation is causing too many difficulties. On the other hand, while investors wait for Fed reactions and next steps, he said the effects of austerity policies have yet to emerge fully. In recent months, supply chain bottlenecks and lower energy prices helped the Fed decrease inflation, but it is still above 6%, which is way higher than the 2% target. This is while re-increasing inflation in January and February, reminding us that it is still so early to talk about solving the problem.
With the current data we have so far, the US labor market remains tight. The unemployment rate eased to 3.4% in January, the lowest since 1969. At the same time, the weekly number of initial jobless claims is close to historical lows. Thursday's data showed that initial jobless claims for last week increased again above 211K, up from 190K the week before, but it is still under the pre-pandemic average. Friday's labor data will give us a brighter idea of what we must wait for in next week's Fed meeting, a 25 bps or 50 bps rate hike.
On Wednesday, we had ADP and JOLTs as well. The "small non-agricultural"-ADP employment number in February increased by 242,000, exceeding market expectations for an increase of 200K. In more detail, financial services employment printed the most significant increase by 62,000 (up 30,000 previously) new jobs; manufacturing employment increased by 43,000 (previously up 23,000); trade/transportation/utilities grew by 3,000 (previously decreased by 41,000); professional/business services and construction decreased by 36,000 (previously increased by 8,000).
Later, JOLT's job vacancies also had a surprise. According to data, we had 10.824 million unfilled vacancies on the last day of January, higher than 10.5 million market expectations. The December number was also revised by 222,000 to 11.234 million. The data also showed that hiring rose to 6.37 million (up from 6.25 million). The negative part was the layoffs, which hit the highest level since December 2020 at 1.72 million (up from 1.48 million), while Job cuts were recorded at 3.89 million (up from 1.48 million).
Nonfarm Payrolls in February are expected to rise by 205K to hold the unemployment rate at 3.4% and Average Hourly Earnings at 0.3% monthly. With ADP, JOLTs, and weekly initial jobless claims we had so far in the past month, beating these data seems so likely, which can lift the USD and hold the pressures on the stock markets.
