Robust Economy, Elevated Geopolitical Risk

March 7, 2022

Robust Economy, Elevated Geopolitical Risk  Photo

The nonfarm jobs report for February surprised to the upside, as employers added 678,000 workers to the payroll, representing the highest number since last July. We are now only 2.1 million workers short of the pre-pandemic peak. Average hourly earnings were unchanged month-over-month, mostly because February’s job gains were more weighted toward lower-paying industries. The ISM Manufacturing Index shows strong momentum in the economy as well. Meanwhile, Federal Reserve Chair Jerome Powell indicated that a 25 basis-point rate hike is likely in March.     

Usually, the nonfarm jobs report is the cover story for weekend papers, however, it only made page 8 of the Financial Times. The current news flow is all about Russia’s invasion of Ukraine, including its attack on the largest nuclear plant in Europe, along with how Ukrainians living abroad are flying back to defend their country and oil prices are up 10% ahead of a potential embargo on Russian oil. Amid these developments, the futures market is indicating another volatile opening on Monday

The Consumer Price Index report on Thursday will be the most important data this week. However, geopolitics are driving the market right now. As the Ukrainian people continue to display bravery fighting the Russian invasion, the risk of escalation is high. As a result, higher commodity prices and volatility, along with lower stock prices, are likely to be with us for a while.    

Tags: ISM Manufacturing Index | Consumer Price Index (CPI) | Federal Reserve | Commodity prices | Volatility | Nonfarm Jobs Report

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