UBS On-Air: Market Moves

Top of the Morning: U.S. labor market & inflationary environment

13 min

The podcast discusses the February US jobs report, which was softer than expected, showing job losses and an uptick in unemployment, though the overall labor market is still seen as "low-hire, low-fire" and stabilizing. It also covers the inflationary environment, anticipating a sizable step down in core inflation for February, with tariffs keeping goods inflation firm and services disinflating due to a softer rental market, while rising oil prices are expected to impact March's headline CPI.

Summarized by Podsumo

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✨ Key Takeaways

1

The February jobs report was significantly softer than expected, showing a loss of over 90,000 jobs versus expectations of 50-60,000 gains, and an uptick in the unemployment rate.
2

The US labor market is characterized as "low-hire, low-fire," with a three-month average job growth of around 18,000 jobs per month, which is at the bottom end of the break-even rate needed to keep unemployment stable.
3

Core inflation is expected to see a sizable step down in February, moving from 30 basis points in January to the low 20s, driven by further disinflation in shelter and contained wage growth.
4

Tariff effects are still contributing to firm goods inflation, running over 1% year-over-year, while services inflation benefits from a much softer rental market.
5

A significant pickup in oil prices will primarily impact March's headline CPI, with a rule of thumb being a $10 change in oil leading to a 40 basis point change in headline CPI, and a modest drag on economic growth.

💬 Notable Quotes

"There's no way to really avoid that this was a soft report softer than our expectations."

— Andrew DeBinsky
"The recent theme that people have used or expression is, you know, that we're in a low higher low-fire labor market. I think that's still the case."

— Andrew DeBinsky
"The past few months have been horrible for data watchers to really infer the trends within inflation because we've had the government shut down affecting the data in terms of not having data and then leading to some distortions toward the end of the year."

— Andrew DeBinsky