Free Access

Succinct Summation of the Week’s Events:

Positives,

1)February payrolls totaled 311k higher, 85k more than expected, partly offset by a net downward revision of 34k over the past two months. The private sector contributed 265k of these jobs, 50k above the estimate as the government added 46k jobs. The participation rate for 25-54 yr olds jumped 4 tenths to 83.1% and is finally back to the Jan/Feb 2020 level.

2)While the average 30 yr mortgage rate lifted another 8 bps to 6.79%, mortgage apps rebounded by 7.4% w/o/w. Purchases after 4 weeks of declines rose 6.6% w/o/w as the spring buying/selling season is upon us, though still down 42% y/o/y. Refi’s were up by 9.4% but down 76% y/o/y.

3)The Bank of Canada did as they said and sat on their hands as they absorb the new macro lay of the land.

4)The Reserve Bank of Australia raised rates by 25 bps today to 3.6% as expected but Governor Philip Lowe revealed some weakening knees. Rather than firmly committing to more hikes, he played the ‘data dependent’ card in what to do next. “In assessing when and how much further interest rates need to increase, the Board will be paying close attention to developments in the global economy, trends in household spending and the outlook for inflation and the labor market.” Thus, there is no lock that April will see another hike and Lowe also said, “The monthly CPI indicator suggests that inflation has peaked. Recent data suggest a lower risk of a cycle in which prices and wages chase one another.”

5)Japan’s February PPI rose 8.2% y/o/y, very high but the slowest since September 2021.

6)Inflation as measured by both CPI and PPI was benign in February in China.

7)China said its February exports fell 6.8% ytd (so takes into account the New Year holiday), a bit better than the forecast of down 9%. Imports though, many of which end up in exports, dropped 10.2% ytd, about double the estimate. Lower commodity prices however was an influence on lower imports.

Negatives,

1)The unemployment rate ticked up by 2 tenths to 3.6% as the 177k person increase in the household survey was more than offset by the rise of 419k in the labor force size. The U6 figure was up by 2 tenths too to 6.8%. The birth/death model also added 176k, 45k more than February 2022 and 39k higher than February 2019, helping to inflate the headline figure. The diffusion index fell to 56, the lowest since February 2019 not including covid and a yr end drop in December 2019. Wage growth was a hair light relative to expectations and hours worked fell to 34.5 from 34.6.

2)While above the estimate for February, ADP has a much different read than the BLS on the pace of US job creation as their 6 month job growth is about 550k less than the BLS.

3)Initial jobless claims rose back above 200k for the first time since the first week of January at 211k, up from 190k last week and 16k more than forecasted. This lifted the 4 week average to 197k from 193k. Also of note, continuing claims jumped by 69k to 1.72mm, matching the highest since January 2022.

4)The Challenger job cut February report said the 77,770 job cuts seen mark “February’s total the highest for the month since 2009 when 186,350 cuts were recorded.” Taking the January/February time frame and the number of job cuts is also the most since 2009. They said “Right now, the overwhelming bulk of cuts are occurring in technology. Retail and financial are also cutting right now, as consumer spending matches economic conditions. In February, job cuts occurred in all 30 industries. In fact, Challenger has not recorded announcements in every industry the firm tracks since January 2013, when cuts occurred in all 29 industries. The firm did not track FinTech until 2019.”

5)It’s a shame to see the collapse of SIVB. KeyBanc comments telegraph what’s to come for many others that will survive.

6)The February Manheim wholesale used car index showed a 4.3% m/o/m price increase seasonally adjusted. This is the biggest one month increase in February since 2009 and thus is not ‘typical’ according to Manheim.

7)Fannie Mae released its February Home Purchase Sentiment Index and it fell 3.6 pts m/o/m and is back near the survey low seen in October 2022. Doug Duncan, their chief economist, said “The decline was partly driven by a substantial decrease in consumers’ sense of home selling conditions, with most respondents who indicated it’s a ‘bad time to sell’ citing unfavorable economic conditions and mortgage rates as the primary reasons for that belief.”

8)The February Logistics Managers’ Index fell 2.9 pts to 54.7 from January. While still above 50 it follows two months of gains. Of note, the ‘transportation costs’ component is “now contracting at the fastest rate we have measured in the 6.5 yr history of the index.” Part of this though is seasonal as February is sort of a hangover month after the holidays and the January gift card usage and returns influence. LMI said “There is some optimism from some corners that traffic will pick back up sometime in Q2 as retailers begin to rebuild inventories ahead of back to school and holiday shopping, but as of this moment that has yet to materialize.” LMI said there has been some loosening of warehouse capacity but storage prices are still accelerating, though should start to moderate.

9)The US January trade deficit widened a touch m/o/m to $68.3b but exports did rise 3.4% m/o/m and imports were higher by 3%.

10)Kuroda exits the BoJ with a yawn as NIRP and YCC continues on.

11)Taiwan said February exports fell 17% y/o/y, worse than the estimate of down 12.5%. Semi’s led the way with a 17.3% drop in shipments y/o/y. We know outside of autos, the demand for them has faltered. Exports to China/Hong Kong fell 30% as Chinese consumers right now on their reopening are spending more on experiences rather than stuff.

12)After a notable jump in December, base pay in January in Japan slowed to .8% y/o/y and that was below expectations.