After much anticipation to the downside, the February Jobs report was a positive surprise on better than expected payrolls, up 175,000.

Equities faltered heading into the close with the Nasdaq closing in the red; however, it is important to note that this not a reflection of shifting Fed expectations – Chair Janet Yellen will likely continue with the present taper pace at the March meeting.

Payroll employment rose by 175,000 in February (vs. consensus 149,000). The negative impact from weather was smaller than economists had expected. In particular, there was an uptick in construction employment despite a snowstorm occurring during the peak period and colder-than-normal temperatures. Payroll job growth over the previous two months was also revised up by a cumulative 25,000.

The unemployment rate increased to 6.7% while the labor force participation rate remained constant at 63.0%. The one negative that can be derived from the report was average weekly hours, which declined to 34.2 in February (vs. consensus 34.4).

A number of Fed officials have expressed interest on an updated guidance framework and increasingly, investors anticipate a change to forward guidance will be unveiled by Yellen during the next meeting in March.

Economists have now turned to assessing Yellen’s ability to execute a transition from one based on quantitative factors (i.e. the 6.5% unemployment rate) to one incorporating qualitative factors.

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