If you want excitement, you need to watch the social media feud that boiled over yesterday, not the payroll data.

On the surface, the report seemed decent.

139k jobs, with 140k in the private sector. The unemployment rate stayed the same.

Average hourly earnings ticked up to 3.9% year-over-year, which is great for workers, but maybe not as great for the bond market.

But there are a lot of things to pick on in this report.

• The prior 2 months were revised down by 95k. That negates much of this month’s reported gain in the Establishment Survey.
• The Household Survey, used for the unemployment rate, lost over 600k jobs. The unemployment rate remained unchanged, only because labor force participation dropped by a similar amount.
• The birth/death model (a measure that tries to estimate the number of jobs created by new businesses and ones lost from defunct businesses) “only” added 199k jobs. With low survey response rates, etc., there are a lot of things to question about the quality of the data (the seemingly endless downward revisions validate that “questioning”), but this number is back to “bothering” me. Without this calculated number, we would have lost jobs in the Establishment Survey (kind of like the Household Survey indicated). Sure, it is possible that in a time of peak uncertainty, lots of new businesses were formed, but the number seems high. It is the 2^nd month in a row where there is a lot of uncertainty, and the birth/death adjustment was bigger than the number itself. That is why I would weigh this into being more dovish, if I was at the Fed.

Apparently, weather was worse than usual, so that might have impacted the data negatively.

Overall, the report is probably a C+.

• If the Fed was looking to cut rates, they could probably come up with a story around this data to let them cut rates.
• Since the Fed doesn’t seem to be looking to cut rates, there is enough of a narrative in this report to keep them on hold.

After this data, I remain in the 3 to 4 cuts this year camp, starting in July.

The social media “feud” yesterday seemed to primarily affect Tesla (that stock moved enough to drag the entire market down). The market had moved higher, earlier, on headlines that the President was making progress with China. Real progress there would be helpful to the market, but a lot is priced in already at this stage.

Consensus is that this “feud” will tone itself down and not have bigger ramifications. That seems to be the logical way for this to progress, and I really hope it doesn’t derail the 2025 Budget. It will be “interesting” to see how this develops and whether there are broader implications from the direction Musk has gone. It doesn’t seem that way, but who had this “feud” playing out the way it did on their bingo card? The break-up seemed like an easy bet, but the nastiness of yesterday wasn’t.

The market seems to be taking the data as “solid” with bonds selling off and stocks rallying. As frequently seems to be the case, look for the initial reaction to retract over the course of the day. This report wasn’t that strong.

The other issue we all face is it is incredibly difficult (if not impossible) to derive much about the “steady state” of the economy going forward from this data. We are in “pause” mode on tariffs, which is manageable, and we need some version of Budget 2025 to make it through as well, to keep the positive momentum on the economy (and markets) going.

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