How Bitcoin Could Be Affected by February’s Positive Jobs Report
Treasury yields are up with job numbers topping economist expectations. What does it mean for high-risk assets like bitcoin?
Jobs in the U.S. rose by 379,000 in February, far above the general consensus of 185,000 to 200,000 jobs, coming in much better than January or December’s report.
The U.S. added a revised 117,000 out of 105,000 expected jobs in January and lost a revised 306,000 jobs in December. In February the unemployment rate fell from 6.3% to 6.2%.
The positive report could create more volatility in the U.S. Treasurys market, David Beckworth, a former international economist at the U.S. Department of the Treasury, told CoinDesk.
On Thursday, bond yields rose to 1.5% after U.S. Fed Chair Jerome Powell said that the economy would see temporary inflation upon reopening. The rate climbed further to 1.61% after Friday’s jobs report came out.
Because of the market's sensitivity to interest rates outlooks, it’s possible there will be a sell-off of high-risk assets (like bitcoin) with the jobs report overshooting estimates, said Steven Kelly, a research associate at the Yale Program on Financial Stability.
It’s unlikely that the Fed will pull back on quantitative easing or raise rates in response to volatility in Treasury yields, Kelly added, but it could consider yield curve control or Operation Twist.
The Fed would have to see “material unintended consequences of QE” to pull back on its $120 billion-a-month of bond purchasing, Kelly said. For now, bitcoiners can still count on the Fed bringing more liquidity to the markets and giving investors the liquidity to invest more in riskier assets.
“Part of QE isn’t just about lower yields,” Kelly said. “It’s about encouraging the search for yield to some extent. That’s often cited as a financial stability downside of QE, but it’s also part of the point – it’s to discourage a flight to safety.”
Pandemic-hit industries returning
The largest increase in jobs came the service sectors hit hardest by COVID-19 – leisure and hospitality industries added 355,000 in the month of February.
“We have an economy that is poised to snapback,” former Federal Reserve macroeconomist Claudia Sahm said on Thursday. “This is still short of mission accomplished; 10 million jobs are still missing.”
The employment-to-population ratio, which measures the number of people employed against the total working-age population, changed little month-to-month at 57.6%, down 3.5 percentage points year-over-year. Employment declined in state and local government education, construction and mining, with local government education losing 37,000 jobs and state government education losing 32,000.
The actual jobs increase could be higher since the Bureau of Labor Statistics survey went out three weeks ago, Sahm added. Vaccinations have increased significantly since then – U.S. President Joe Biden announced this week that there would be enough vaccine supply to cover all Americans by the end of May, two months ahead of previous estimates.
While the additional jobs are not insignificant, they are unlikely to have an impact on stimulus negotiations, Sahm added. This means that somewhere between a $1.5 trillion and $1.9 trillion relief bill (depending on negotiations) is coming for Americans soon, she said.
Update (March 5, 15:02 UTC): Adds additional details from the jobs report and commentary from experts.
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