Markets with Megan

Megan Horneman, Chief Investment Officer at Verdence Capital Advisors, brings you insights on the February employment report in today's episode. While the market response was relatively subdued, with equities initially rising and later pulled down by Nasdaq profit-taking, the employment data revealed a creation of 275,000 jobs in February, exceeding expectations. However, the unemployment rate rose to 3.9%, a two-year high, due to more people entering the labor force without immediate employment. Job gains were prominent in education, healthcare, leisure, hospitality, and government sectors, but concerns arise from the decline in temporary workers for the 23rd consecutive month and a lower trend in weekly hours worked. Megan looks into the implications for the Federal Reserve, noting that rate cuts are anticipated in June, but the Fed remains cautious, watching for signs that wage pressures are truly easing. Reach out with your questions or comments at podcast at Verdence dot com.

Hello, this is Megan Horneman, the Chief Investment Officer for Verdence Capital Advisors, coming to you today, Friday, march 8th, with our regular segment of Markets with Megan, and we're going to discuss the employment report that we got this morning. This report comes the first Friday of every month, and it typically is a big market mover. Not too exciting today. I apologize to report, but the number of jobs that was created was a bit better than expected 275,000 jobs were created in the month of February. The unemployment rate, though, did rise. It rose from 3.7 to 3.9, which is basically a two-year high, and that is because more people entered the labor force but didn't immediately find work, so that counts in increasing the unemployment rate. Let's dig a little deeper into where the jobs were created. If you look, it was primarily in the education, healthcare, as well as leisure and hospitality, and then government jobs. They led the gains.

Where we saw weakness in this report, as far as some of the leading indicators for employment, are temporary workers. We've often talked about temporary workers. When they start to decline, that typically does mean the unemployment rate is going to trend higher. Temporary workers actually fell for the 23rd consecutive month, and then the weekly hours worked, which is another indicator that we look at for the future health of the labor market, because typically employers will cut the hours worked before they'll cut the employees. That actually ticked a little bit higher one-tenth higher this month, but the trend has definitely been lower over the previous six months or so.

What does this all mean for the Federal Reserve? It's really a mixed bag here. The markets didn't do a ton. The equity markets were higher, then they were pulled lower by the tech heavy Nasdaq as people started to take profits off of some of this big surge we've seen in tech stocks, but the chances of rate cuts are pretty much fully baked into the June meeting. We're still holding off waiting to see if that's going to come to fruition, because the hourly earnings, which is an inflation indicator, they ticked up a little bit. It's been slowing though, but they're still rising over 4% on a year-over-year basis. So the Fed's going to want to see some more indication that these wage pressures are really getting out of the economy. That's all we have today with the reports. Sorry, it wasn't too exciting. Next week we will not have a markets with Megan, but we'll be back the following week with lots more information, and if you have any questions or comments, please feel free to reach out to podcast at Verdence dot com. Thank you.