JOBS DATA AT 8:30 AM

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By: Kent Engelke | Capitol Securities

The February BLS employment report is released at 8:30 am. Most are expecting the data to be robust for a myriad of reasons including the generational low in weekly jobless claims, the ADP employment report and the strongest consumer and business sentiment in over 15 years

Most believe this report will be the basis for a rate increase next week and some are suggesting the data could be the catalyst to a more hawkish monetary policy position.

Analysts are expecting a 4.7% unemployment rate, a 200k and 210k increase in nonfarm and private sector payrolls, respectively, a 0.3% increase in hourly earnings, a 34.4 hour workweek and a 62.9% labor participation rate (LPR).

I believe the most important components of the report will be the LPR and hourly earnings. To date, earnings growth has remained subdued, perhaps the result of a generational low LPR.

I think if the LPR and hourly earnings surprise on the upside, a considerably more hawkish monetary policy stance will evolve. By every benchmark, even if the overnight rate is increased by the consensus view of 0.75% during 2017, monetary policy will still be regarded as very simulative.

Commenting about yesterday’s market action, oil fell below $49 for this first time this year almost sending equities to its fourth consecutive decline if it were not for a late recovery. Treasuries sank a ninth consecutive day as the ECB expressed optimism on global growth and inflation. The 2-year treasury, or the instrument most sensitive to monetary policy, rose to the highest yield in seven and half years.

Last night, the foreign markets were up. London was up 0.50%, Paris up 0.52% and Frankfurt up 0.57%. China was down 0.12%, Japan up 1.48% and Hang Sang up 0.29%.

The Dow should open moderately higher ahead of the jobs data, but this could change radically if the statistics differ greatly from the consensus view. The 10-year is unchanged at a 2.60% yield, oil is up about 1%.

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