Strong Jobs Number Turns Up Hawkish Pressure, Biden’s Fed Nominees Grilled, Fed/MIT Report On Digital Currency

Retail sentiment is so bad that it is good and the jobs number this morning was so good that they’re bad. This is of course because one of the Fed’s main metrics guiding tightening is employment and the bumper report makes it harder for it to stall any longer. Everyone knows which way the inflation numbers are pointing, but until “full-employment,” which is a somewhat ambiguous term, is reached they had a little more maneuvering. The report definitely added credibility to the sentiment that the Fed is behind the curve, but only time will provide the ultimate verdict. The next meeting of the FOMC is 3/15-3/16 and all expectations are for lift-off.

After the strong jobs report Fed Funds Futures moved to suggest not only more hikes in 2022 but also the increased likelihood of a 50 bps hike in March. There were also strong upward adjustments in previous months. Omicron headwinds don’t appear likely to keep the doves around in other words. Sick workers stayed on payrolls. Treasuries also sold off and the 10-yr reached 1.93%. The next inflation numbers are out on February 10th, which will be highly anticipated by fixed income markets and the Fed itself.

Another positive from the report was that labor participation reached the highest rate since the pandemic began at 62.2%. This...
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