January’s US jobs report was strong, showing the labour market continues to recover rapidly from the pandemic despite new Omicron cases.
Payrolls surged by 467,000 last month. November and December’s data was revised to include 709,00 extra jobs and average hourly earnings rose 5.7%YoY as the tighter labour market boosts wage growth well above the lacklustre 2-3% rates recorded after the 2008 financial crisis.
Source: Bank of Singapore, Bloomberg.
The jobs report thus reinforces the likelihood of the Federal Reserve raising its fed funds rate from 0.00-0.25% by 25bps in March to curb inflationary pressure as the US economy keeps rebounding. Treasury yields jumped after the data with the 10Y note hitting our 12-month forecast of 1.90%.
10Y yields have now surged from 1.50% at the start of 2022 - as the first chart shows - turning financial markets volatile this year.
Source: Bank of Singapore, Bloomberg.
But despite the strong payrolls data, the Fed is unlikely to hike 50bps. The second chart shows the US is still almost 3 million jobs short of pre-pandemic levels.
Source: Bank of Singapore, Bloomberg.
Moreover, unemployment ticked up from 3.9% to 4.0% in January as labour participation finally rose from 61.9% to 62.2% with workers side-lined during the crisis at last beginning to return. As the pandemic wanes, more workers are likely to come back pushing participation up as the third chart shows. Their return will ease pressure on inflation, enabling the Fed to hike each quarter - rather than more aggressively in 2022 to the detriment of risk assets.
Important information
This product may only be offered: (i) in Hong Kong, to qualified Private Banking Customers and Professional Investors (as defined under the Securities and Futures Ordinance); and (ii) in Singapore, to Accredited Investors (as defined under the Securities and Futures Act) and (iii) in the Dubai International Financial Center to Professional Clients (as defined under the Dubai Financial Services Authority rules) only. No other person should act on the contents of this document.This product may involve derivatives. Do NOT invest in it unless you fully understand and are willing to assume the risks associated with it. If you have any doubt, you should seek independent professional financial, tax and/or legal advice as you deem necessary.
Please carefully read and make sure that you understand all Risk Disclosures, Selling Restrictions, and Disclaimers. This document must be read together with the relevant Prospectus & Offering Documents &/or Key Fact Statement.
Disclaimer
This document is prepared by Bank of Singapore Limited (Co Reg. No.: 197700866R) (the “Bank”), is for information purposes only, and is not, by itself, intended for anyone other than the recipient. It may contain information proprietary to the Bank which may not be reproduced or redistributed in whole or in part without the Bank’s prior consent. It is not an offer or a solicitation to deal in any of the investment products referred to herein or to enter into any legal relations, nor an advice or by itself a recommendation with respect to such investment products. It does not have regard to the specific investment objectives, investment experience, financial situation and the particular needs of any recipient or customer. Customers should exercise caution in relation to any potential investment. Customers should independently evaluate each investment product and consider the suitability of such investment product, taking into account customer’s own specific investment objectives, investment experience, financial situation and/or particular needs. Customers will need to decide on their own as to whether or not the contents of this document are suitable for them. If a customer is in doubt about the contents of this document and/or the suitability of any investment products mentioned in this document for the customer, the customer should obtain independent financial, legal and/or tax advice from its professional advisers as necessary, before proceeding to make any investments.
The Bank, its Affiliates and their respective employees are not in the business of providing, and do not provide, tax, accounting or legal advice to any clients. The material contained herein is prepared for informational purposes and is not intended or written to be used, and cannot be used or relied upon for tax, accounting or legal advice. Any such client is responsible for consulting his/her own independent advisor as to the tax, accounting and legal consequences associated with his/her investments/transactions based on the client’s particular circumstances.
This document and other related documents have not been reviewed by, registered or lodged as a prospectus, information memorandum or profile statement with the Monetary Authority of Singapore nor any regulator in Hong Kong or elsewhere.
This document may not be published, circulated, reproduced or distributed in whole or in part to any other person without the Bank’s prior written consent. This document is not intended for distribution to, publication or use by any person in any jurisdiction outside Singapore, Hong Kong, or such other jurisdiction as the Bank may determine in its absolute discretion, where such distribution, publication or use would be contrary to applicable law or would subject the Bank and its related corporations, connected persons, associated persons and/or affiliates (collectively, “Affiliates”) to any registration, licensing or other requirements within such jurisdiction.
