Post
小猪天上飞-Piglet
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Non-farm data hides mysteries; the Federal Reserve's strategic patience crushes market expectations
In January, the U.S. non-farm employment added 1.75 million jobs, and the unemployment rate remained stable at 4.4%. However, the data for the previous two months was revised down by 760,000, indicating a continued cooling of the labor market. This seemingly robust report is, in fact, turbulent beneath the surface, with healthcare and government sectors becoming the main employers, while the technology and transportation industries show signs of fatigue. The market refers to it as the "golden-haired girl data," as it raises no concerns of recession while also not indicating overheating.
The Federal Reserve leverages this to reinforce its strategic patience stance, with the probability of a rate cut in March plummeting to 91%. The yield on 10-year U.S. Treasuries responded by rising, putting pressure on interest-sensitive sectors. Banks like JPMorgan benefit from a stable credit environment, while real estate and small-cap stocks face sell-offs. Amazon, on one hand, is laying off 160,000 employees, while on the other, it is heavily investing in AI automation, revealing that companies are replacing labor costs with capital expenditures.
The most fatal flaw in this report lies in the revisions. Data from the past few months has been continuously revised down, exposing the lag in statistics and the real divergence from the actual economy. The market suddenly realizes that the so-called employment resilience is merely an illusion of the data. The Federal Reserve sees through this, and therefore, plays the game, using patient policies to force the market to recognize reality. A Goldman Sachs report indicates that if non-farm employment remains below 200,000, the Federal Reserve may consider a shift. Currently, we are far from this threshold.
In January, the U.S. non-farm employment added 1.75 million jobs, and the unemployment rate remained stable at 4.4%. However, the data for the previous two months was revised down by 760,000, indicating a continued cooling of the labor market. This seemingly robust report is, in fact, turbulent beneath the surface, with healthcare and government sectors becoming the main employers, while the technology and transportation industries show signs of fatigue. The market refers to it as the "golden-haired girl data," as it raises no concerns of recession while also not indicating overheating.
The Federal Reserve leverages this to reinforce its strategic patience stance, with the probability of a rate cut in March plummeting to 91%. The yield on 10-year U.S. Treasuries responded by rising, putting pressure on interest-sensitive sectors. Banks like JPMorgan benefit from a stable credit environment, while real estate and small-cap stocks face sell-offs. Amazon, on one hand, is laying off 160,000 employees, while on the other, it is heavily investing in AI automation, revealing that companies are replacing labor costs with capital expenditures.
The most fatal flaw in this report lies in the revisions. Data from the past few months has been continuously revised down, exposing the lag in statistics and the real divergence from the actual economy. The market suddenly realizes that the so-called employment resilience is merely an illusion of the data. The Federal Reserve sees through this, and therefore, plays the game, using patient policies to force the market to recognize reality. A Goldman Sachs report indicates that if non-farm employment remains below 200,000, the Federal Reserve may consider a shift. Currently, we are far from this threshold.
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