US macro/job adds

Jobs day came and went, surprising materially to the upside (>350K jobs added in the month, relative to closer to 200K expected).

Average hourly earnings grew at an unsustainable pace, 0.55% month on month, which annualises out to a very large ~6.5% yearly rate.

The number of hours worked fell quite a bit, and AHE, which is a residual calculation, rose accordingly.

Our view; take the numbers with a grain of salt. December and January seasonal adjustments can confound a clear reading. That said, fair to say that the labour market remains in good health, and any near term US recession narrative predicated on the jobs market cracking can be pushed back by a lot.

US bond yields rose strongly, and on the face of it, a modestly lower likelihood of May rate cuts.

However, with inflation tracking to target, and other labour market indicators like quit rates, employment to population, job openings and initial claims data at more normalised levels, we think the bias remains toward cuts in May, and the ongoing normalisation of monetary policy in line with current market expectations.

Either way, good for stocks (the job numbers) and neutral to slightly bad for bonds (given yields are now back above 4% we think they have sufficient valuation support to be appealing from DAA perspective).

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