The American labor market unleashed a burst of hiring in January, producing another wave of robust job growth even as interest rates continue to rise.
Employers added 517,000 jobs on a seasonally adjusted basis, the Labor Department said on Friday, an increase from 260,000 in December.
The unemployment rate was 3.4 percent, the lowest since 1969.
Even as hiring surged, wage growth slowed slightly to 0.3 percent compared with December.
…
In addition to the report on Friday, the government released data this week showing that the number of posted jobs per available unemployed worker — a measure that policymakers have been watching closely — rose again in December. And despite a cavalcade of layoffs in the technology sector, the overall number of pink slips has stayed extremely low.
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The job growth was broad-based, including in some industries that economists had expected to show signs of slowing. Employers in leisure and hospitality, including restaurants and bars, brought on a bevy of workers.The labor force participation rate was unchanged at 62.4 percent. Fed officials have been hoping to see an increase in the ranks of those available to work, which could alleviate the tightness in the labor market that is driving up wages and contributing to inflation.
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Average hourly earnings climbed by 4.4 percent over the year, more than forecast in a Bloomberg survey of economists but less than 4.8 percent in December. Pay growth has been decelerating for months, though it remains faster than is typical and is still notably quicker than the pace that Fed officials have at times suggested would be consistent with their 2 percent inflation goal.
The Bank of England hiked 50bp yesterday:
The Bank of England’s Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. At its meeting ending on 1 February 2023, the MPC voted by a majority of 7–2 to increase Bank Rate by 0.5 percentage points, to 4%. Two members preferred to maintain Bank Rate at 3.5%.
Global consumer price inflation remains high, although it is likely to have peaked across many advanced economies, including in the United Kingdom. Wholesale gas prices have fallen recently and global supply chain disruption appears to have eased amid a slowing in global demand. Many central banks have continued to tighten monetary policy, although market pricing indicates reductions in policy rates further ahead.
UK domestic inflationary pressures have been firmer than expected. Both private sector regular pay growth and services CPI inflation have been notably higher than forecast in the November Monetary Policy Report. The labour market remains tight by historical standards, although it has started to loosen and some survey indicators of wage growth have eased, alongside a gradual decline in underlying output. Given the lags in monetary policy transmission, the increases in Bank Rate since December 2021 are expected to have an increasing impact on the economy in the coming quarters.
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In the latest modal forecast, conditioned on a market-implied path for Bank Rate that rises to around 4½% in mid-2023 and falls back to just over 3¼% in three years’ time, an increasing degree of economic slack, alongside falling external pressures, leads CPI inflation to decline to below the 2% target in the medium term. There are considerable uncertainties around this medium-term outlook, and the Committee continues to judge that the risks to inflation are skewed significantly to the upside.
The European Central Bank also hiked 50bp:
The Governing Council will stay the course in raising interest rates significantly at a steady pace and in keeping them at levels that are sufficiently restrictive to ensure a timely return of inflation to its 2% medium-term target. Accordingly, the Governing Council today decided to raise the three key ECB interest rates by 50 basis points and it expects to raise them further. In view of the underlying inflation pressures, the Governing Council intends to raise interest rates by another 50 basis points at its next monetary policy meeting in March and it will then evaluate the subsequent path of its monetary policy. Keeping interest rates at restrictive levels will over time reduce inflation by dampening demand and will also guard against the risk of a persistent upward shift in inflation expectations. In any event, the Governing Council’s future policy rate decisions will continue to be data-dependent and follow a meeting-by-meeting approach.
The New York Fed has released a paper by Julian di Giovanni, Şebnem Kalemli-Özcan, Alvaro Silva, and Muhammed A. Yıldırım titled Quantifying the Inflationary Impact of Fiscal Stimulus under Supply Constraints:
This paper builds on Baqaee and Farhi (2022) and di Giovanni et al. (2022) to quantify the contribution of fiscal policy to U.S. inflation over the December 2019-June 2022 period. Model calibrations show that aggregate demand shocks explain roughly two-thirds of total model-based inflation, and that the fiscal stimulus contributed half or more of the total aggregate demand effect.
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U.S. headline inflation has hit levels not seen for several decades, reaching 9 percent per annum at its peak in June 2022, before declining to approximately 7 percent per annum by the end of 2022. In contrast, inflation was below 2 percent before the 2020 COVID-19 pandemic.A priority that has been at the top of the minds of both policymakers and academics alike has been to quantify the relative importance of the key factors in driving the observed inflation, particularly the relative importance of supply bottlenecks vs. consumer demand, as the U.S. and world economies struggled with supply-demand imbalances arising from the COVID-19 health shock combined with stimulative policies.
The literature thus far has found differing results, ranging from one-third to two-thirds contributions from supply factors (with the remaining being demand). Shapiro (2022a,b) takes an econometric approach while di Giovanni et al. (2022) and Ferrante, Graves and Iacoviello (2022) use quantiative models.
Though these papers provide important early evidence on the different channels that drove the surge in inflation, none of them take a stand on the inflationary impact of specific policy actions. In particular, the 2021 Biden fiscal package totaled 15% of GDP and has been blamed by some for today’s high inflation (Blanchard, Domash and Summers, 2022).
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
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| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1855 % | 2,586.2 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1855 % | 4,960.2 |
| Floater | 8.71 % | 8.86 % | 55,396 | 10.47 | 2 | -0.1855 % | 2,858.6 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.3770 % | 3,439.1 |
| SplitShare | 4.89 % | 6.39 % | 53,719 | 2.80 | 7 | 0.3770 % | 4,107.0 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.3770 % | 3,204.4 |
| Perpetual-Premium | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.7667 % | 2,879.9 |
| Perpetual-Discount | 5.92 % | 5.98 % | 82,948 | 13.94 | 37 | 0.7667 % | 3,140.4 |
| FixedReset Disc | 5.39 % | 7.15 % | 91,883 | 12.56 | 59 | -0.1752 % | 2,259.5 |
| Insurance Straight | 5.79 % | 5.94 % | 91,685 | 13.97 | 20 | 0.0258 % | 3,101.2 |
| FloatingReset | 9.67 % | 10.15 % | 39,773 | 9.37 | 2 | 0.1892 % | 2,579.4 |
| FixedReset Prem | 6.33 % | 6.30 % | 196,069 | 4.06 | 3 | 0.0132 % | 2,392.8 |
| FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1752 % | 2,309.7 |
| FixedReset Ins Non | 5.40 % | 7.05 % | 46,887 | 12.71 | 14 | 0.4296 % | 2,390.8 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| IFC.PR.C | FixedReset Disc | -23.54 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-03 Maturity Price : 14.00 Evaluated at bid price : 14.00 Bid-YTW : 9.24 % |
| CU.PR.G | Perpetual-Discount | -1.32 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-03 Maturity Price : 19.49 Evaluated at bid price : 19.49 Bid-YTW : 5.78 % |
| IAF.PR.B | Insurance Straight | -1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-03 Maturity Price : 20.50 Evaluated at bid price : 20.50 Bid-YTW : 5.69 % |
| BN.PF.A | FixedReset Disc | 1.00 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-03 Maturity Price : 20.20 Evaluated at bid price : 20.20 Bid-YTW : 7.47 % |
| GWO.PR.Q | Insurance Straight | 1.02 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-03 Maturity Price : 21.57 Evaluated at bid price : 21.83 Bid-YTW : 5.97 % |
| CU.PR.I | FixedReset Disc | 1.02 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2025-12-01 Maturity Price : 25.00 Evaluated at bid price : 24.75 Bid-YTW : 4.78 % |
| BMO.PR.W | FixedReset Disc | 1.12 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-03 Maturity Price : 18.00 Evaluated at bid price : 18.00 Bid-YTW : 7.15 % |
| MFC.PR.M | FixedReset Ins Non | 1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-03 Maturity Price : 17.74 Evaluated at bid price : 17.74 Bid-YTW : 7.49 % |
| BMO.PR.T | FixedReset Disc | 1.20 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-03 Maturity Price : 17.71 Evaluated at bid price : 17.71 Bid-YTW : 7.29 % |
| BN.PF.C | Perpetual-Discount | 1.23 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-03 Maturity Price : 19.75 Evaluated at bid price : 19.75 Bid-YTW : 6.23 % |
| PVS.PR.J | SplitShare | 1.30 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2028-02-29 Maturity Price : 25.00 Evaluated at bid price : 23.30 Bid-YTW : 6.18 % |
| PVS.PR.H | SplitShare | 1.44 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2027-02-28 Maturity Price : 25.00 Evaluated at bid price : 24.00 Bid-YTW : 6.07 % |
| CU.PR.J | Perpetual-Discount | 1.49 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-03 Maturity Price : 20.43 Evaluated at bid price : 20.43 Bid-YTW : 5.82 % |
| BN.PF.I | FixedReset Disc | 1.49 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-03 Maturity Price : 22.39 Evaluated at bid price : 23.10 Bid-YTW : 7.11 % |
| BIP.PR.E | FixedReset Disc | 1.72 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-03 Maturity Price : 21.58 Evaluated at bid price : 21.93 Bid-YTW : 7.02 % |
| IAF.PR.I | FixedReset Ins Non | 1.99 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-03 Maturity Price : 22.30 Evaluated at bid price : 23.05 Bid-YTW : 6.37 % |
| CU.PR.E | Perpetual-Discount | 4.40 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-03 Maturity Price : 21.10 Evaluated at bid price : 21.10 Bid-YTW : 5.82 % |
| CU.PR.D | Perpetual-Discount | 4.51 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-03 Maturity Price : 21.10 Evaluated at bid price : 21.10 Bid-YTW : 5.82 % |
| CU.PR.H | Perpetual-Discount | 10.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-03 Maturity Price : 22.38 Evaluated at bid price : 22.65 Bid-YTW : 5.79 % |
| PWF.PR.L | Perpetual-Discount | 11.17 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-03 Maturity Price : 21.50 Evaluated at bid price : 21.50 Bid-YTW : 5.98 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| TRP.PR.C | FixedReset Disc | 60,800 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-03 Maturity Price : 12.20 Evaluated at bid price : 12.20 Bid-YTW : 8.34 % |
| NA.PR.C | FixedReset Prem | 52,440 | YTW SCENARIO Maturity Type : Call Maturity Date : 2027-11-15 Maturity Price : 25.00 Evaluated at bid price : 25.75 Bid-YTW : 6.30 % |
| PWF.PR.P | FixedReset Disc | 38,100 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-03 Maturity Price : 13.10 Evaluated at bid price : 13.10 Bid-YTW : 7.91 % |
| NA.PR.S | FixedReset Disc | 35,430 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-03 Maturity Price : 18.31 Evaluated at bid price : 18.31 Bid-YTW : 7.36 % |
| FTS.PR.K | FixedReset Disc | 27,879 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-03 Maturity Price : 17.18 Evaluated at bid price : 17.18 Bid-YTW : 7.49 % |
| FTS.PR.M | FixedReset Disc | 23,081 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-03 Maturity Price : 18.16 Evaluated at bid price : 18.16 Bid-YTW : 7.51 % |
| There were 12 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| IFC.PR.C | FixedReset Disc | Quote: 14.00 – 18.50 Spot Rate : 4.5000 Average : 3.0708 YTW SCENARIO |
| ELF.PR.H | Perpetual-Discount | Quote: 22.75 – 23.35 Spot Rate : 0.6000 Average : 0.3512 YTW SCENARIO |
| BMO.PR.Y | FixedReset Disc | Quote: 19.20 – 19.95 Spot Rate : 0.7500 Average : 0.5372 YTW SCENARIO |
| TD.PF.M | FixedReset Disc | Quote: 24.37 – 25.00 Spot Rate : 0.6300 Average : 0.4378 YTW SCENARIO |
| CM.PR.Q | FixedReset Disc | Quote: 19.27 – 19.98 Spot Rate : 0.7100 Average : 0.5777 YTW SCENARIO |
| SLF.PR.G | FixedReset Ins Non | Quote: 13.35 – 13.69 Spot Rate : 0.3400 Average : 0.2472 YTW SCENARIO |