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Another upside surprise for US NFP jobs report

Daniel Richards - MENA Economist
Published Date: 13 March 2023


There was another big upside surprise for the US nonfarm payroll report in February in data released on Friday as it came in at 311,000, compared with the consensus prediction of 225,000. While this was not to the same magnitude as the January upside surprise (revised down to 504,000 in the latest data), it is nevertheless indicative of a labour market that remains strong despite the monetary tightening already implemented by the Federal Reserve. However, despite the strong headline figure some other elements of the labour report were somewhat softer, leading to a dialing back of market bets for a 50bps hike at the upcoming FOMC meeting. In particular, average hourly earnings growth slowed to 0.2% m/m, compared with the 0.3% in January. Expectations had been for growth to stay stable last month, so the undershoot offered some hope that wage pressures on prices might ease. Meanwhile, the headline unemployment rate ticked up from the multi-decade low of 3.4% in January to 3.6%, although this was in part due to a larger participation rate which climbed to 62.5% (the highest level since March 2020, as the Covid-19 pandemic took hold) from 62.4% previously. The next key data point markets will be watching for is the CPI inflation print due on Tuesday, which is expected to see price growth slow from 6.4% y/y in January to 6.0% last month.

The collapse of Silicon Valley Bank in the US continues to jitter markets and policy makers in the US and elsewhere with other banks coming under pressure as concerns around their deposits and liquidity escalate. The Federal Reserve and the Federal Deposit Insurance Corp are reportedly considering creating a fund that would enable the regulators to backstop deposits at other banks that might come under pressure. Treasury Secretary Janet Yellen was making media appearances on Sunday looking to reassure depositors.

The UK recorded real GDP growth of 0.3% m/m in January, exceeding predictions of 0.1% growth and marking a recovery from the 0.5% contraction seen in December when the economy was roiled by extensive industrial action and high levels of absences at schools. Industrial production contracted by 0.3% m/m in January, down from 0.3% growth the previous month and missing projections for no change, with construction declining by 1.7%, so it was a 0.5% expansion in the services sector which underpinned the headline figure. The economy was broadly flat on January 2022, however, with the UK economy having failed to grow over the past 12 months.

Saudi Aramco has announced a record profit of USD 161bn on the back of the elevated oil prices and a rise in production to 11.5mn b/d last year. Capital expenditure was up 18% to USD 37.6bn last year and the company plans to raise this to USD 45bn-USD 55bn this year. The dividend was increased by 4% to USD 19.5bn.

Today’s Economic Data and Events

  • 16:00 India CPI inflation, February, % y/y. Forecast: 6.4%

Fixed Income

  • Treasury markets surged at the end of the week as investors flocked to quality amid the collapse of SVB, a tech-focused bank in the US, and the potential of spillover effects to other segments of the financial system. The Federal Reserve and FDIC are reportedly considering whether to establish a backstop fund to preserve deposits at stricken financial institutions.
  • The panic over the collapse of SVB has outweighed the impact of economic data in terms of market anticipation over the trajectory for US rates. On Wednesday last week, the peak in the Fed Funds rate was set at about 5.7% as markets responded to the hawkish tone from Fed chair Jerome Powell. By the end of trading on Friday, market pricing for the terminal rate capped at 5.3%. Treasury markets rallied enormously: the 2yr UST yields fell 28bps to 4.586% on Friday alone and was down nearly 50bps from its mid-week peak of roughly 5.1%. The 10yr UST yield slumped 20bps on Friday, down 32bps from its peak of more than 4% briefly reached earlier in the week.
  • European bond markets also rallied substantially in the final trading days of the week as anxiety spread over the damage that low-rate government bonds may have done to bank balance sheets. Bund yields fell 13bps to 2.501% while gilt yields sank 16bps to 3.633%.
  • Emerging market bonds look to have weathered the storm of selling so far relatively well with a broad index of USD-denominated bonds actually rallying at the end of the week while yields in local currency markets dipped: Turkish 10yr bond yields fell 16bps to 11.33% while South African bonds closed with an upward bias along with Indian 10yrs.
  • Market focus may be less on central banks this week than on containing the fallout of the SVB collapse but the ECB is set to meet on March 16 with a 50bps hike expected. Bank Indonesia is the other major bank to set policy this week.


  • The major drop in US yields weighed on the dollar with the greenback losing ground against nearly all peers at the end of the week. EURUSD rallied 0.6% on Friday to close at 1.0643 while GBPUSD added almost 0.9% to 1.203. Both the Japanese Yen and Swiss Franc rallied as investors moved into havens with USDJPY down 0.8% on Friday to 135.03 while USDCHF fell by 1.3% to 0.9207.
  • Commodity currencies took the volatility more or less in their stride with USDCAD closing nearly flat, though it has moved against the loonie for 15 of the last 20 trading days. AUDUSD fell 0.2% to 0.658 while its counterpart across the Tasman saw a bump of 0.5% on Friday as NZDUSD closed at 0.613.


  • Concerns around the US banking sector weighed heavily on global equity markets through the end of last week, prompting sharp w/w losses at Friday’s close. A 3.0% drop on Friday led the Hang Seng to end the week 5.5% lower, with the mainland Shanghai Composite losing 2.7%. A weaker yen as the Bank of Japan made no fundamental changes to monetary policy supported Japanese equities, and the Nikkei ended the week 0.8% higher, but that was an outlier and even there the index dropped 1.7% on Friday.
  •  In the UK, the FTSE 100 lost 1.7% on Friday as banking stocks took a hit, leading to a w/w loss of 2.5%. The CAC and the DAX ended the week down 1.7% and 0.9% w/w respectively.
  •  Further losses in the US on Friday saw the Dow Jones, the S&P 500, and the NASDAQ end Friday down 4.4%, 4.6%, and 4.7% respectively w/w.


  • Oil prices ended the week with a bounce with Brent futures closing Friday at 1.5% to USD 82.78/b and WTI up by 1.3% at USD 76.68/b. However, the gains failed to recoup much of the ground lost earlier in the week and both contracts closed lower week/week.
  • The US drilling rig count ticked lower last week as E&P firms cut back on oil rigs in particular. The rig count in the Permian fell by 6 rigs, the biggest move among large shale basins.