We expect nonfarm payrolls growth slowed to 75k in February, down from January’s peak, but still well above the 2025 run rate. If our estimates are correct, this would bring the 3m average of nonfarm payrolls growth up to 84k, the fastest pace since January 2025. The unemployment rate likely remained steady at 4.3%. Measures of layoffs remain near historic lows, but we have not seen a convincing pickup in hiring and labor demand. Average hourly earnings growth likely slowed modestly to 0.3% m-o-m, keeping y-o-y wage growth unchanged at 3.7%. January employment growth appeared to overshoot, with alternative indicators, including continuing claims and ADP, showing a more-muted acceleration to start the year. This raises the risk of negative payback in February and potential downward revisions to January. The underlying trend for employment appears positive though. Service sector surveys point to steady employment growth. The February household survey will incorporate new Census population estimates for 2025. Instead of backward revisions, the household survey simply switches over to new population controls in January, creating the risk of anomalous oneoff moves, especially for “counting” variables, like total employment or the size of the labor force, as well as some demographically sensitive measures, like labor force participation and the employment-population ratio. To summarise, we expect February to solidify the narrative that the labor market has stabilized following last year’s slowdown scare. As a result of labor market improvement, we expect the FOMC to keep policy unchanged through the remainder of Powell’s term as chair, through the March and April meetings. From a market perspective, while UST yields have fallen sharply to multi week lows due to Iran scare, we believe it is difficult to sustain 10yr USTs below 3.85% for long (current yield 3.93%). With tariff refund cases coming up soon, fiscal issues might soon come to forefront provided the Iran issue does not flare up further. 2*10 has already flattened to 30 levels but has scope to further flatten if there is an actual US attack on Iran. We wait to put on steepeners at around 25 levels or just before NFP data release on Friday. We exit our long UK gilts call given on 16th Nov’25 when 10yr UK gilts were at 4.58. Current yield is 4.23. Profit target was 4.2 https://macro-spectrum.com/trade-recommendation/buy-10yr-uk-gilts US equities are facing sustained head winds due to questions on AI capex returns as well as Iran scare. Even strong Nvidia results this week could not cheer up mag 7 equities. Hence, we exit our long S&P call given on 8th Nov when S&P was at 6729. CMP is 6878. https://macro-spectrum.com/trade-recommendation/buy-sp-500
