US labour market holds, trade deficit falls

The much-awaited US jobs report for February was out yesterday. MarketWatch reports:

Nonfarm payrolls increased by 97,000, trivially lower than the 100,000 expected by economists surveyed by MarketWatch and the lowest since January 2005, but traders may have been expecting a much weaker number...

Payroll growth in the previous two months was revised higher by a total of 55,000. January's payrolls were revised up to 146,000 from 111,000...

The jobless rate fell to 4.5% from 4.6% because people dropped out of the labor force...

Average hourly earnings increased a larger-than-expected 6 cents, or 0.4%, bringing the year-over-year gain to 4.1%. Higher wages could fuel inflation, Fed officials fear.

A blast of cold and wet weather in February after two months of relatively balmy conditions "likely contributed" to job losses in construction, said Philip Rones, deputy commissioner of the Bureau of Labor Statistics, in a statement...

The weather may have also contributed to a six-minute decline in the average workweek to 33.7 hours. Total hours worked in the economy fell by 0.3%.

As Morgan Stanley economists David Greenlaw and Ted Wieseman wrote, "the report suggests that the labor market is holding together reasonably well at this point". As usual though, watch for the revisions in subsequent months.

Yesterday also saw the Commerce Department release data on wholesale inventories. From MarketWatch:

Wholesale inventories rose by 0.7%, the Commerce Department reported Friday, following an unrevised drop of 0.5% in December.

In the past 12 months, wholesale inventories are up 9.2%.

However, the more anticipated report from the Commerce Department yesterday was on the trade deficit. Again from MarketWatch:

The nation's trade deficit narrowed by 3.8% to $59.1 billion, the Commerce Department said. This is the fourth narrowing of the deficit in the past five months...

December's trade deficit was revised slightly to $61.5 billion from the initial estimate of $61.2 billion...

Exports increased 1.1% to $126.7 billion, while imports declined 0.5% to $185.8 billion.

Markets largely reacted as expected. From Bloomberg:

An unexpected drop in unemployment helped U.S. stocks post their first back-to-back gains in almost a month and provide investors with a week's worth of profits.

Treasuries declined the most this year and the dollar touched the highest in more than a week against the yen as the jobs report reduced bets the Federal Reserve will cut interest rates by midyear.

The stock market's positive reaction to the jobs report, despite its implication for inflation, shows how much the market is preoccupied with growth concerns.