Q4 Productivity & Labor Costs Going Right Way

Bond and stock prices opened weak this morning on good news from the labor market. Good news is bad news because the Fed is trying to slow the economy to bring down inflation. So good news increases the risk of higher-for-longer interest rates. The 10-year Treasury bond yield is back above 4.00%. At 4.95%, the 2-year Treasury yield reached levels not seen in more than a decade. The yield curve remains significantly inverted. We still believe that the 10-year yield peaked at 4.25% on October 24, 2022. Here is our quick take on this morning's data.

(1) Jobless claims. Initial claims for state unemployment benefits dropped 2,000 to 190,000 for the week ended February 25. It was the seventh straight week that claims remained below 200,000. Severance packages may be keeping some laid off workers from filing claims.