SignalPlus Macroeconomic Analysis (20240311): The specter of economic recession resurfaces, BTC re-challenges the $70,000 mark

The non-farm payrolls released last Friday showed a significant increase of +275,000 in February, but the previous value was drastically revised down by 167,000. The unemployment rate also surged from 3.7% to 3.9%, while the average hourly wage growth rate fell from the previous 0.5% to just 0.1%, causing the annual growth rate to slow from 4.5% to 4.3%.

Although the media may focus more on the better-than-expected job growth, most economists point out that considering the significant downward revision of the previous value and the spike in the unemployment rate, this report is actually quite weak. Additionally, Citigroup noted that (the strong job market) has shown concerning cracks, with the 3-month average unemployment rate potentially being 0.5% higher than the recent 12-month low, which is an early signal of recession ("Sahm Rule").

Due to the disappointing non-farm payroll data, the market began to reassess the possibility of a recession, with U.S. Treasury yields facing pressure (declining) for most of last Friday. The one-year SOFR rate fell, and rumors about the European Central Bank taking more aggressive rate cuts also helped support bond prices. On the other hand, stronger-than-expected inflation and wage growth in Japan may force the Bank of Japan to end its negative interest rate policy in March, pushing the dollar against the yen below 147, while the U.S. 10-year yield approached 4% again.

This week’s focus will be on the U.S. CPI data to be released tomorrow, which may cause the Federal Reserve to feel concerned again. Core CPI is expected to continue rebounding from January levels, with the Cleveland Fed predicting a 0.43% month-on-month increase in overall CPI for February and a 0.32% month-on-month increase in core CPI, both showing an upward trend, with the super core CPI appearing particularly concerning.

Risk assets experienced a pullback last Friday afternoon, with the semiconductor sector dropping 4% from its peak, value stocks performed well, the dollar rose, while BTC has not yet challenged the $70,000 mark again. Market complacency remains high, with Bloomberg reporting that investors have been increasing short volatility trades for most of the past 2.5 years, and the assets under management of short volatility ETFs have quadrupled in the past 2 years to reach $64 billion.