3/10 - Weekly Economic Highlights

US Nonfarm payroll employment rose by 311,000, beating expectations calling for a 225,000 increase in jobs for the month of February. The leisure and hospitality, retail trade, government and healthcare sectors saw the largest gains. The unemployment rate ticked up to 3.6% due to more workers entering the labor force as the participation rate increased to 62.5%, the highest level since March 2020. Workers between the ages of 25 and 54 led the expansion, with significant gains for women and minorities who comprised a disproportionate amount of the job losses during the pandemic. Over time, more workers in the labor market should help ease inflationary pressures. Average hourly earnings were up 0.2% month-over-month, the slowest increase in a year, and rose 4.6% on a year-over-year basis, primarily driven by the service industry. In other labor market news, the Job Openings and Labor Turnover (JOLTS) survey fell to 10.8 million, but remains elevated, and initial jobless claims edged up slightly to 211,000.

The relatively positive employment report was quickly overshadowed by the announcement that Silicon Valley Bank (SVB) was closed today and taken into possession by California bank regulators and entered into FDIC receivership. The bank is expected to reopen on Monday to repay insured depositors. The concern surrounding SVB caused a flight to quality in the US Treasury market over the past couple of days with the 2-year US Treasury, which had reached a yield of 5.08% earlier in the week, plunging down to 4.60% and the 5-year US Treasury falling back below 4.00% as of this writing. The increase in the headline unemployment rate, the slowdown in average hourly earnings, and the SVB news caused the bond market to reduce the probability that the Fed would hike more than 0.25% at their March 22 meeting. The Fed will have important datapoints to consider next week, especially CPI inflation and advance retail sales data releases on Tuesday and Wednesday, respectively.

Next Week:

Consumer Price Index (CPI), Producer Price Index (PPI), Empire Manufacturing, Retail Sales, Philadelphia Fed Business Outlook, University of Michigan Sentiment Index

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© 2023 Chandler Asset Management, Inc. An Independent Registered Investment Adviser. Data source: Bloomberg, Federal Reserve, and the US Department of Labor. This report is provided for informational purposes only and should not be construed as specific investment or legal advice. The information contained herein was obtained from sources believed to be reliable as of the date of publication, but may become outdated or superseded at any time without notice. Any opinions or views expressed are based on current market conditions and are subject to change. This report may contain forecasts and forward-looking statements which are inherently limited and should not be relied upon as an indicator of future results. Past performance is not indicative of future results. This report is not intended to constitute an offer, solicitation, recommendation, or advice regarding any securities or investment strategy and should not be regarded by recipients as a substitute for the exercise of their own judgment. Fixed income investments are subject to interest rate, credit, and market risk. Interest rate risk: The value of fixed income investments will decline as interest rates rise. Credit risk: the possibility that the borrower may not be able to repay interest and principal. Low-rated bonds generally have to pay higher interest rates to attract investors willing to take on greater risk. Market risk: the bond market, in general, could decline due to economic conditions, especially during periods of rising interest rates.