Here a Job, There a Job, Everywhere a Job Job

The US Employment report came out this morning, and traders are still trying to extinguish the flames from the rocket. While expectations had been somewhat muted, the employment report showed a 353,000 increase in employment – far exceeding expectations. Once we see the breakdowns, revisions, etc. we will have more clarity as to how truly good the number is, but the headline number was enough to completely change things.

Within minutes of the release, markets which had been enjoying a nice little Friday bump quickly reversed course with the Dow, S and P 500, and the Nasdaq all loosing about 50% of their gains. Yields shot up across the board, and the Canadian dollar got taken out back to the woodshed ( sorry for anyone wanting to travel south for March break ). 

However, the most interesting part to me was the almost instant revision to the Fed schedule for the remainder of 2024. Markets had been pricing in 6 cuts of 25 bps each prior to this morning. I thought that was aggressive to say the least, however, by 8:34 am that is down to just 4 cuts of 25 bps in 2024. 1 data point, 1 single release moved expectations by 50 bps. Since Canada follows the US, look for revisions to the BOC schedule as well. In tandem with that, a market which had been basically pricing in the first Fed rate cut in March, has now pushed that out to June. 

I have harped and harped on how data is important, and 1 single number can completely change things. This morning proved exactly that. All it took was 1 single data point to completely change the outlook for the next 325 days of the year. Now, I don’t think we are out of the woods, and in fact there is a lot of trouble brewing under the surface. If you are bored this weekend, spend 45 minutes to an hour researching US regional banks, and commercial real estate. I promise it won’t be a boring hour. 

Time will tell if today’s employment report really makes a difference in the long run, but for today at least, the headline number was enough to make everyone re think things. Maybe the economy is better than we think? Maybe inflation is a little stickier than we thought? Maybe rates will stay a touch bit higher for a tad bit longer? In the business we are in, you must be constantly willing to change your mind when the facts change. If you can’t adapt and change, then you will be out looking for a new job. Good news – there appears to be plenty of them……..