The Independent Market Observer

High Stakes for the February Jobs Report

Posted by Brad McMillan, CFA, CAIA, MAI

Find me on:

This entry was posted on Mar 9, 2023 12:59:09 PM

and tagged Commentary

Leave a comment

jobs reportThere is a lot riding on the monthly jobs report, which comes out tomorrow. For the economy, more jobs are good: more workers, more wage income, more spending ability, and so forth. There’s no real downside. But for financial markets, a strong report would be problematic. Those workers—earning and spending their wages—add to demand, which adds to inflation. So, a strong report would be bad news for the Fed, for interest rates, and for markets. This is the problem we face tomorrow. 

Was the January Report a One-Off?

The reason the stakes are so high is that we are coming off last month’s incredibly strong jobs report. While job growth prior to last month was still at strong levels, it had been slowing, and the sense was that the job market as a whole was slowly normalizing. Last month’s data raised the possibility that the labor market was much stronger than anyone had suspected and that inflation might be about to take off again. Data since then, from other areas besides the labor market, has since confirmed that. The question this month is whether we get another incredibly strong report—in which case we likely will see a continued acceleration in inflation again—or whether last month was a one-off. 

What’s Expected?

Economists as a group expect job growth of around 200,000, which would be in line with levels before last month and would signal continued reasonable growth rates. So far, that number looks reasonable. Other data is mixed, with the ADP jobs number coming in a bit higher, at 242,000 on Wednesday, but with job openings down a tick and with layoffs up last week by more than usual. 

If we do get the expected 200,000, or really anything between say 180,000 and 240,000, this would be a return to the prior trend and would signal that last month was indeed a one-off. There is precedent for this, as we saw a similar spike in July 2022, only to see job growth drop back the following month. That would be perceived as a positive by the Fed and markets, suggesting that inflation may start moderating again but is still high enough to allow for continued economic growth. 

Based on the data so far, I think that is what will happen. Signs of slowing outnumber signs of strength, making the chance that last month was a fluke likely. At the same time, labor demand continues strong, which suggests a significant drop is also unlikely. A return to the previous trend makes the most sense. 

Look Beyond the Jobs Number

We will also want to look at other underlying stats. Wage growth, for example, feeds directly into inflation and has been trending down, even last month. There are some signs that trend may be accelerating, and that will be a key data point on Friday. 

Similarly, the unemployment rate, which remains very low but has stabilized recently, is based on a survey of households and not businesses. It will give a take on labor supply versus demand, and an uptick would signal more slowing. 

The Big Picture

What I expect tomorrow is a return to the previous trend of strong performance but with signs of progressive slowing. Job growth should come in around 200,000, wage growth should continue to moderate, and unemployment should tick back up a bit. If that happens, it will be good news. It will mean the economy continues to grow but slowly—which is exactly what we need for a soft landing.

Subscribe via Email

Commonwealth 2023 Economic and Market Outlook
Crash-Test Investing

Hot Topics

New Call-to-action



see all



The information on this website is intended for informational/educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.

Certain sections of this commentary contain forward-looking statements that are based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets.

The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. All indices are unmanaged and investors cannot invest directly in an index.

The MSCI EAFE (Europe, Australia, Far East) Index is a free float‐adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI EAFE Index consists of 21 developed market country indices.

One basis point (bp) is equal to 1/100th of 1 percent, or 0.01 percent.

Third-party links are provided to you as a courtesy. We make no representation as to the completeness or accuracy of information provided on these websites. Information on such sites, including third-party links contained within, should not be construed as an endorsement or adoption by Commonwealth of any kind. You should consult with a financial advisor regarding your specific situation.


Please review our Terms of Use

Commonwealth Financial Network®