Source: US Dept. of Treasury End of Day
• The yield on the two-year Treasury note rose just two basis points last week to a yield of 1.63%. The three-month treasury bill dropped to a 2019 low of 1.51%. The yield on short bills is down almost 50 basis points since the Fed started buying bills in September.
• The jobs report came in above expectations at 266 thousand versus expectations of 180 thousand. The strong jobs report validates the Fed’s decision to delay further rate cuts, but it should not fuel expectations of a rate increase. That would only be the case if an overheated job market were stoking higher inflation and inflation expectations. There are few signs that labor costs are putting upward pressure on inflation.
• Nonfarm payrolls have averaged 180 thousand so far this year, which is down from average growth of 223 thousand in 2018. The pool of available workers is shrinking, making it harder for companies to find qualified applicants to fill positions. This supply constraint alone will curtail the pace of job creation over the next year.
• GPA believes that the record-long expansion will gradually lose momentum amid intensifying headwinds, including sluggish global growth, lingering uncertainty over trade policy, and restrained business investment spending.
