The Jobs Report Was Awful But U.S. Market Has a Bigger Concern

Digging Into the February Jobs Report

At first glance, this report was so awful, it cannot be true.

Headline jobs: 92,000 job losses. Almost all of the losses in the private sector.

Revisions: -69,000.

Labor force participation rate: 62%.

I know it doesn’t work, but I flicked my screen with my finger, thinking maybe if I just jostled it, a sensical number would come up! Though it must be “sensical,” since last month’s participation rate was “only” 62.1% (instead of the initially published 62.5%).

Weather has to have had an impact. (Does immigration play a role in any of these numbers?)

The Unemployment Rate

We had 0.5% decline in labor participation from what was originally published last month to this month. Yet the unemployment rate only went up 0.1% to 4.4%.

So, the first thing I did was check the household data (because that is what is used for unemployment).

The report shows 185,000 jobs lost in February.

That seemed like too few jobs lost for the unemployment rate to not be a lot worse.

So, I glance at the January household survey number: -895,000 jobs.

The household survey has lost 1 million jobs in two months. But, I swear, even I would have caught such a big number in January.

On February 11, when we got the report, January household employment was 528,000.

The household data is notorious for its massive margin of error, but it looks like we quietly revised down 1.4 million jobs?

I am sure there are weather factors and so many other potential “garbage” inputs, which were only made worse by the government shutdowns, that I will take this report with a grain of salt.

Bottom Line

My bigger concerns coming into the weekend, for next week: Can we get a deal of some sort to get oil flowing again in the Middle East?

I suspect all parties are looking for an off-ramp, though I'm not sure there is anyone truly in power in Iran to negotiate any such deal.

I want to be fairly neutral on rates and risk at the moment.

If we get some sort of “deal” with Iran, equities and bonds will rally strongly Monday.

If there's no deal, then we face a down market (though one that will be subject to “hopeful” headlines).

It's probably “slightly” biased to be positioned to the risk-off side of fairly neutral, especially if no one comes up with a really good explanation on why this month’s job report was so dreadful (pretty much across the board). What does scare me is that last month’s headline number was only revised down by 4,000, and it still sits at what might be a mythical 126,000.

I will be booking some flights, just in case jet fuel keeps going higher!

I also want to wish all our service members the best in these difficult and dangerous times.