Stimulus 3.0 and February Jobs Report

With the House having passed it’s version of Stimulus 3.0 on Friday, Senate Democrats look set to take up their version this week. One issue that will have to be addressed between the two bills is the minimum wage provision. It is in the House bill but the Senate parliamentarian ruled it could not be included in the reconciliation procedure so it will not be in the Senate bill. No Republicans are likely to vote for the measure so the Dems will have to keep all 50 of their senators in line.  Assuming it passes in the Senate  it will go to conference committee to iron out differences between the House and Senate bills, like the minimum wage measure.  The finished bill should be ready for the President’s signature in mid-March which coincides with Stimulus 2.0 unemployment benefits expiring. Away from Capitol Hill, but still in DC, Fed Chair Powell will take questions from the Wall Street Journal on Thursday and the markets will be looking for any signs of concern over the relentless rise in Treasury yields. He didn’t express concern in last week’s congressional testimony so if any creeps in this week the markets will take note. Last but not least, we get the February jobs report on Friday which is expected to post 180,000 new jobs which would be nice after two straight months of rather disappointing jobs data.


Treasuries
Treasury Curve Today Week Change
3 Month 0.03% Unch
6 Month 0.05% +0.02%
1 Year 0.07% +0.02%
2 Year 0.13% +0.02%
3 Year 0.27% +0.05%
5 Year 0.72% +0.11%
10 Year 1.44% +0.06%
30 Year 2.20% +0.03%

 

Short-Term Rates
Fed Funds 0.25%
Prime Rate 3.25%
3 Mo LIBOR 0.19%
6 Mo LIBOR 0.20%
12 Mo LIBOR 0.28%
Swap Rates
3 Year 0.403%
5 Year 0.844%
10 Year 1.520%

 

Economic Calendar
Date Statistic For Briefing Forecast Market Expects Prior
Mar 1 ISM Manufacturing Index Feb 58.6 58.9 58.5
Mar 3 ADP Employment Change Feb 200k 200k 174k
Mar 3 ISM Services Index Feb 58.7 58.7 58.7
Mar 4 Factory Orders (MoM) Jan 1.8% 1.8% 1.1%
Mar 5 Change in Nonfarm Payrolls Feb 180k 180k 49k
Mar 5 Unemployment Rate Feb 6.4% 6.4% 6.3%
Mar 5 Underemployment Rate Feb NA NA 11.1%
Mar 5 Labor Force Participation Rate Feb 61.4% 61.4% 61.4%
Mar 5 Average Hourly Earnings (MoM) Feb 0.2% 0.2% 0.2%

 Top 5 Events for the Week

Mar. 1 — 5, 2021

1. Biden Stimulus 3.0 Senate Vote Likely — All Week
2. February Employment Report — Friday
3. Fed Speak (Powell) — Thursday
4. February ISM Manufacturing — Monday
5. February ISM Services — Wednesday

 

1.  Biden Stimulus 3.0 Senate Vote Likely — All Week

With the House having passed it’s version of Stimulus 3.0 on Friday, Senate Democrats look set to take up their version this week. One issue that will have to be addressed between the two bills is the minimum wage provision. It is in the House bill but the Senate parliamentarian ruled it could not be included in the reconciliation procedure so it will not be part of the Senate bill. No Republicans are likely to vote for the measure so the Dems will have to keep all 50 of their senators in line.  Once it’s passed in the Senate it will go to conference committee to iron out differences between the House and Senate bills, like the minimum wage measure. The finished bill should be ready for President Biden’s signature sometime in mid-March which coincides with Stimulus 2.0 unemployment benefits expiring.

 

2.  February Employment Report — Friday

The January Employment Report disappointed the market with a small gain of 49 thousand jobs and that came on the heels of a loss of 140 thousand jobs in December.  For February expectations are for a decent gain of 180 thousand jobs but nearly 10 million remain jobless from the pandemic after almost a year and that speaks to the long and grinding nature that will be this recovery if job growth doesn’t accelerate markedly. A weak or mediocre report will only add emphasis to the debate over Stimulus 3.0.

 

3.  Fed Speak (Powell) — Thursday

It’s another busy week of Fed Speak with seven members making remarks with the headliner being Chair Powell discussing the economy on Thursday with the Wall Street Journal. It will be a moderated event with Q&A. The market will be looking for any signs that Powell is getting concerned about the relentless increase in yields that has characterized February. During his congressional testimony last week, he explained that the increase in yields was due to investor optimism over expected growth and not so much a fear of gathering inflation. He also noted any inflation spike from fiscal and monetary stimulus is likely to be temporary. We’ll see if the story stays the same.

 

4.  February ISM Manufacturing Index — Monday

In addition to the employment numbers we get two other big February economic reports in the form of the ISM Manufacturing Index later this morning, and the ISM Services Index on Wednesday. Combined with the jobs report on Friday these three reports will give us a good idea of February activity. The ISM Manufacturing Index is expected to be 58.9 versus 58.7 in January indicating the manufacturing sector is expected to remain in solid expansionary territory which has been the case since June.

 

5.  February ISM Services Index — Wednesday

The ISM Services Index on Wednesday is expected to print a 58.7 matching the level in January. So in all, the pair of reports, ISM Manufacturing and Services, are expected to show solid expansion in both sectors with little change in activity between January and February.

 


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Published: 03/01/21 Author: Thomas R. Fitzgerald