The yield curve experienced a parallel shift upwards at each maturity last week. Friday witnessed an impressive jobs report that reinforced confidence in the economic recovery’s durability. Despite record COVID infections in January, U.S. employers added 467,000 jobs during the month representing a 280% beat relative to the median estimate of 125,000. Average hourly earnings also topped expectations and rose 0.7% in January and 5.4% year-over-year. Importantly, the labor participation rate jumped to 62.2% from December’s 61.9% level. The participation rate has increased 50 bps since October and is key to improving supply chains and curbing inflation. However, it still remains over 100 bps below pre- Covid levels. Nonetheless, the jobs report will likely provide the Fed with the necessary confidence in the U.S. economy to begin its path to multiple rate hikes in 2022.
Inflation, inflation, inflation. The theme that dominated the first half of the year continued into Q3 and we expect it will for the foreseeable future.