Report (Premium Edition) 03-01-2021

Stocks were mixed on Friday, though were lower on the week, and are likely to remain and cautious. Last week’s pop-in interest rates will remain the focus, even as rates corrected lower on Friday, with some help from month-end demand and dip-buying.

The 30-year yield finished down over 13 bps at 2.148% and the 10-year was off 10 bps to 1.425% after intraday tests of 2.39% and 1.6% Thursday. We suspect some give-back of duration buying could see rates drift higher.

All focus is on the 10-Year rising and inflation worries. Several market analysts are even advising institutional clients to hedge inflation by going into gold, commodities, and real estate. Gold has recently dipped, but commodities are rising fast. Specifically, lumber and steel prices are making record highs.

There’s a lot of key data and events again this week, including Friday’s jobs report and more comments from Fed Chair Powell. Today’s slate is on the light side and features the February manufacturing ISM, expected steady at 58.7. January construction spending is forecast to rise 0.7% after increasing by 1.0% previously. The earnings calendar slows some but features reports from JD.com, Zoom Video, NIO, BeiGene, Novavax, and C3ai.

Key Drivers for the Week of March 1st

TIP – This is a 1 minute brief bullet-point summary as a tool that gives them a fast and simple list of what to watch for and talking points.

• Surging rates and inflation worries roil equities on valuation fears, eventual policy shifts 
• U.S. employment report, ISMs expected to show recovery remains intact
• Fedspeak includes Chair Powell, Brainard, Williams, Bostic, Daly, Evans, Harker
• Canada has GDP, Ivey PMI, trade, current account, productivity, building permits
• China Caixin/Markit PMI; Japan PMIs, auto sales, unemployment, capex, confidence
• RBA expected on hold at 0.10% rate; Bank Negara seen keeping rate at 1.75%
• Eurozone and Germany report PMIs, CPI, retail sales, unemployment rate 
• UK releases manufacturing, services, composite PMIs, money supply, lending data
• Switzerland reports retail sales, manufacturing PMI, CPI numbers

Key Market Trends

Tip: Use this as a quick guide on the direction of key markets. I once had a client that would call me nearly every day asking the direction of the markets. This is a quick cheat sheet to know the trend and help understand what is happening with the markets.

S&P 500 Sectors

Tip: Use this section to know the performance of various sectors, weight portfolios, or look for trades. Modern portfolio theory stresses the importance of diversification, but recently several sectors like technology have out-performed others like unities. This is also a way to narrow the sectors to find investment opportunities.

REIT Alert: Due to Covid-19, there is a large percentage of people that have not paid rent or mortgages. We are very worried about the effect it could have on real estate investment trusts (REITS) value. Even though the sectors may trending bullish, we believe that REITs could have a significant drop in value.

Week Ahead: Yields Surge on Rising Confidence, but Investors Fear Policy Impacts

On March 1, 2021

The surge in Treasury yields was the big story last week and will remain the focus near term. Fed Chair Powell attributed the rise in long term rates to improving confidence in the recovery and played down inflation as a cause. But equity investors didn’t really care about explanations and just saw rising interest rates weighing on valuations. This is likely to be a tense and jittery week of trading as the markets assess growth and inflation dynamics in the context of ongoing central bank liquidity and more U.S. stimulus. Globally there will be plenty of key data to analyze including employment, PMIs, prices, and sentiment. Monetary policy developments will be on view too. Comments from Powell and ECB officials will be monitored for any reaction to last week’s market turmoil. The RBA and Bank Negara hold policy meeting though no changes are anticipated.

NORTH AMERICA

The U.S. employment report (Friday) will garner the bulk of the attention, as usual, and especially now as the employment situation is key to the Fed’s stance. However it will be a long time before the Fed will even start to think about changing policy. Nevertheless, the data could impact outlooks and hence be consequential for the markets in their current shaky state. A 350k gain is projected for February nonfarm payrolls after the 49k increase in January and the -227k tumble in December. The jobless rate should sustain the January plunge to 6.3% from 6.7% in December. Broadly, we expect the payroll rebound to gain steam in 2021 following the winter lull, thanks to vaccines, reopenings, and stimulus payments. But there is still a ways to go before employment returns to pre-pandemic levels. Payrolls over the May-January period have recovered 56% of the jobs lost last March and April, though hours-worked have reclaimed a larger 70% of the drop, as the workweek surge means that hours have been recouped by fewer workers working longer hours.

The ISM reports will offer a timely update on manufacturing and service sector activity in February. The manufacturing ISM (Monday) is expected to hold steady in February from 58.7 in January, and down from a 2-year high of 60.7 in December. Producer sentiment has remained firm into 2021 as businesses scramble to rebuild inventories, with an added lift into 2021 from stimulus distributions and expanding vaccine availability as holiday coronavirus restrictions are eased. The ISM non-manufacturing index (Wednesday) is seen dipping to 58.5 in February after rising 1 point to 58.7 in January. The index saw a 17-month high of 58.1 in July and has held up surprisingly well considering the lockdowns through the winter. The prices indexes in both the manufacturing and non-manufacturing indexes will garner a lot of attention. They have firmed since last fall, especially the manufacturing ISM, with any gains in February likely to further stoke the market’s inflation worries.

Fedspeak will be highly anticipated this week with Chair Powell’s comments on Thursday highlighting. He indicated last week he was not too concerned about the surge in rates as the run up has been for the “right” reason — improving confidence in growth versus worries over inflation. And we expect him to maintain that posture. The markets, and especially Treasuries, were roiled last week as signs of rising price pressures pushed longer dated yields to their highest levels in over a year. However, bonds have been on the rise for months, and really took off after the January 5 runoff elections in Georgia. To a person Fed officials have not indicated any concerns over the pop in yields and several have said the move up doesn’t warrant any policy action. There are several other Fedspeakers too, including Governor Brainard and NY’s Williams, as well as FOMC voters Bostic, Daly, and Evans, along with Harker. The Fed will also release its Beige Book.

The earnings calendar continues to wind down this week. Monday has JD.com, Zoom Video, NIO, BeiGene, Novavax, and C3ai. Tuesday brings Sea Limited, Target, Veeva Systems, Ross Stores, AutoZone, and HP Enterprise. Wednesday gives Snowflake, Brown Forman, Marvell Technology, Splunk, Trip.com, and Dollar Tree. Thursday has Broadcom, Costco, Canadian Natural Resources, Kroger, Cooper Companies, Burlington Stores, Toro, and National Beverage. KB Financial reports on Friday.

A busy slate is in store for Canada this week, contrasting with the lean offerings last week. GDP is front and center, with GDP (Tuesday) expected to slow to a 7.0% growth rate in Q4 from the 40.5% bounce in Q3 and the -38.1% plunge in Q2. GDP (Tuesday) is expected to rise 0.3% in December after the 0.7% gain in November. The current account is seen at –C$8.0 bln deficit in Q4 from the -C$7.5 bln shortfall in Q3. Productivity (Thursday) is anticipated to drop -2.0% in Q4 after the -10.3% plunge in Q3. The trade deficit (Friday) is seen narrowing to -C$1.3 bln in January from the -C$1.7 bln shortfall in December. The Ivey PMI is due Friday while building permits are released on Wednesday. There is nothing from the BoC this week, but next week’s announcement (March 10) is expected to result in no change to the 0.25% rate target and a reiteration of its commitment to maintain ultra-accommodative policy for as long as it takes.

ASIA

The focus will remain on the rising growth and inflation outlooks following last week’s surge in global bond yields. Equity markets will remain sensitive to interest rate movements given the impact on valuations, and as the affect monetary policy. The regional economic calendar will feature China Caixin/Markit manufacturing and services PMIs. Japan has its manufacturing and services PMIs, along with unemployment and consumer confidence. Elsewhere, trade, prices and growth data are slated. On the central bank front, there are meetings from Australia’s RBA, where no changes to the 0.10% OCR is expected. The Bank cut the rate by 15 basis points back in October. In Malaysia, Bank Negara is seen on hold as well, with rates at 1.75%.

China’s February Caixin/Market manufacturing PMI (Monday) is expected to inch up to 51.7 after dipping 1.5 points to 51.5 in January. The index has reflected expansionary activity since April. The February services PMI (Wednesday) should improve to 52.5 from 52.0. Japan February manufacturing PMI (Monday) is expected to confirm the flash reading of 50.6, up from January’s 49.8. February auto sales are also due Monday. The January unemployment rate (Tuesday) is estimated to edge back up to 3.0% versus the 2.9% from November and December, with the job offers/seekers ration steady at the 1.06, the same as November and December, and on the mend from the 1.03 from September. The MoF Q4 capex survey (Tuesday) likely showed the contraction rate slowing to -2.0% y/y from -10.6% in Q3. The February services PMI is due Wednesday. February consumer confidence (Thursday) is seen improving to 31.0 from 29.6.

South Korea February trade (Monday) should see the surplus narrow to $2.0 bln from $3.7 bln. Both exports and imports have been strengthening the last few months. January industrial production is due Tuesday. Q4 revised GDP (Thursday) is seen unchanged at 1.4% y/y. February CPI (Thursday) is expected to warm to 1.0% y/y from 0.6%. Indonesia February CPI (Monday) is penciled in little changed at 1.5% y/y from 1.6%. Taiwan January leading indicators are due Wednesday. Hong Kong releases January retail sales (Wednesday) which are seen at -12.0% y/y from -13.2% on a value basis, and -12.5% y/y from -14.0% on a volume basis.

Malaysia’s Bank Negara meets Thursday, and is seen on hold, with rates at 1.75%, where it has been since the 25 bp cut in July 2020. The easing bias should remain intact given the pandemic. Thailand February CPI (Friday) likely rose to 0.3% y/y from -0.3%. Singapore February PMI (Tuesday) likely ticked up to 53.0 from 52.9. January retail sales (Friday) are expected at -4.0% y/y from -3.6% previously. Philippines February CPI (Friday) is forecast at 4.6% y/y from 4.2%.

In Australia, the RBA’s meeting (Tuesday) is the highlight. No change is expected to the current 0.10% rate setting. The RBA has been consistent that the cash rate will be maintained at 10bps for as long as necessary– as such, the market has fully priced in low for as long as needed. We expect the RBA to reiterate its commitment to maintaining an ulta-accommodative policy setting. Inflation concerns are beginning to filter into the market, but central bankers have expressed confidence that they can keep prices under control. The focus of the data calendar is GDP (Wednesday), which is expected to grow 3.0% (q/q, sa) after the 3.3% gain in Q3 and -7.0% plunge in Q2. The trade surplus (Thursday) is seen narrowing to A$6.5 bln in January from AQ$6.8 bln in December. The current account surplus (Tuesday) is projected to widen to A$13.5 bln in Q4 from A$10.0 bln in Q3. Building approvals (Tuesday) are expected to contract -3.0% in January after the 10.9% bounce in December. A 0.6% gain is anticipated for the final report on retail sales (Thursday) during January, which would match the 0.6% from the preliminary report and follow a -4.1% tumble in December. Housing investment (Monday) is pegged at a 4.0% gain in January after the 8.6% rise in December.

New Zealand’s calendar is lean, with Q4 terms of trade (Tuesday) and January building permits (Wednesday). Last week, RBNZ governor Orr reiterated that the bank remains “focused on maintaining low and stable consumer price inflation and contributing to maximum sustainable employment.” Low for longest remains firmly in place at the RBNZ, as it does at all the core central banks.

EUROPE

Eurozone: confidence has strengthened according to the February survey round, so far mainly thanks to a very robust manufacturing sector. Here price pressures also seem to be building as input costs pick up sharply. However, while vaccinations underpin hopes for a strong recovery later in the year, the rollout has been slow across most EU countries and while some – like Italy and Spain – have a type of varied lockdown strategy that seems designed for the long haul, Germany’s states are itching to re-open schools and part of the services sector even though a mutating virus versions have raised fear of a third wave. A difficult situation that will leave the ECB on standby and with a very close eye on long yields and spreads ahead of the March 11 council meeting. ECB speakers, including Villeroy and Guindos will already have a chance to push back against the rise in yields next week.

This week’s economic calendar focuses on final PMI readings and preliminary inflation data for February. We don’t expect major revisions for the survey indicators and see manufacturing PMI (Monday) confirmed at 57.7 (median same) and the services reading (Wednesday) at 44.7, which should leave the composite at 48.1 (medians same). The indexes still reflect a slight contraction in overall economic activity, thanks to lockdown measures, but with confidence in the future recovery picking up, not just in manufacturing.

At the same time, the manufacturing PMI highlighted a sharp rise in input costs, that tied in with rising import and PPI inflation in Germany. German HICP inflation (Monday) is expected to hold steady at 1.6% y/y (median same) in the preliminary reading for February, clearly above Eurozone CPI (Tuesday), which we expect to remain at 0.9% y/y. The latter is far below the ECB’s target and after lower than expected numbers for France and Spain, the forecast comes with a risk to the downside, highlighting that the ECB can remain relaxed about inflation developments, even if and when overall activity starts to pick up.

It will also take a while before wage pressures start to emerge, even if government measures have helped to keep overall jobless numbers much lower than would have been expected with the type of slump in activity that we saw last year. German sa jobless numbers (Tuesday) are expected to drop back -5k (med -10K) over the month, which should leave the adjusted jobless rate at 6.0%. Similarly the overall Eurozone unemployment rate (Thursday) is expected to hold steady at 8.3% (median same).

It is a busy data week that also include German and Eurozone retail sales for January and German manufacturing orders for the same month. The former will largely be impacted by virus-restrictions, the latter is expected to rebound slightly after the slump in December, although large levels of stock building ahead of the original Brexit date may distort underlying developments at the moment.

U.K.: the UK has maintained its ahead-of-the-pack vaccine rollout, which has the potential to see the UK become restriction free by June, assuming the vaccination program remains on track and that new variants don’t throw a spanner in the works. Studies in the UK have already shown that the vaccinations slash risk of infection, illness and death from SARS-Cov2. This along with the fact that Brexit uncertainty has finally ended have been boons to the UK economic outlook, which has been reflected by recent outperformance of the pound, which last week scaled to three-year highs against the dollar, and respective one-year and 33-month highs versus the euro and yen. The currency, as measured by the BoE’s real effective exchange rage, remains about 7% down on the levels that were prevailing just ahead of the Brexit referendum on 23 June 2016.

One salient question is how well the UK economy is faring on this side of Brexit. There are many reports of disruption at borders and in trade with the EU compared to life as a member of the single market and customs union, but there hasn’t been any significant shortages in goods while the preliminary February PMI surveys pointed to a marked improvement in private sector economic activity despite the UK nations enduring Covid lockdowns (which the University of Oxford ranks as the fourth most restrictive in the world currently, after Ireland, Eritrea and Cuba). Other metrics also offer encouragement since leaving the common market, with consumer prices having declined, sterling having gained, as have UK stock markets, including small cap stocks of domestically oriented companies.

The UK data calendar this week is highlighted by the release of the final February PMI surveys alongside the latest lending and money supply data from the BoE. The preliminary February composite PMI came in above expectations, rising to a two-month high of 49.8 headline from the 41.2 reading that was seen in January. The consensus forecast is for an unchanged headline reading. The improvement in the prelim data was driven by a marked rebound in the services PMI, to a four-month high of 49.7 in the headline reading, up from 39.5 in the prior month and well above the median expectation for a much more modest rise to 41.0. The manufacturing PMI headline came in at 54.9, rising from 54.1 in January. Overall, the surveys indicate the private sector output is at broadly stable levels, having recovered from the January contraction, when the latest UK-side lockdown began. Among the details, job declines in the service sector have been much less this month than in January, with survey respondents noting hopes for a rebound in consumer demand on the other side of the lockdown, encouraged by the pace of the Covid vaccination roll-out. Business expectations for the 12 months ahead were accordingly the most upbeat since last April. Overall, an encouraging report, showing that the are roots to the reflation trade. The UK economy is set to expand markedly over the coming months.

Switzerland: The Swiss data calendar this week features January retail sales and February manufacturing PMI data (both Monday), alongside February CPI data (Wednesday). The headline PMI figure is expected to rise to 60.0 from 59.4 in January, while the headline CPI figure is expected to lift to -0.3% y/y from -0.5% in the month prior.

Stocks & ETF Watch List

Tip: Use this section to find stocks and ETFs to add value to your portfolio by increasing the alpha (return) and decreasing beta (beta). Our list is updated weekly to help provide our readers with timely insights. Readers should do their own research before making any investment.

Solid Picks

This group of stock/ETF picks is likely to experience growth and perform well into the near future. The “Fair Value” is a calculation using a discount cash flow analysis to determine the Intrinsic Value. The rank score of a stock, where a score of 1 is best. This algorithm compares a company to its peers and considers the consistency of key return metrics. Share Value is what they think the price per share should be. The overall score, which 99 is the best) is computed from the percentile rank of valuation, growth, financial strength, efficiency, momentum, and dividends. The score also considers the past performance of a stock in each of the component areas relative to peers.

Income Stock & ETFs Picks

This list of stocks and ETFs are selected for their ability to pay dividends. The dividend score of a stock, where a score of 99 is best. This algorithm compares a company to its peers and considers the consistency of key dividend metrics as well as their direction of change. The overall score, which 99 is the best) is computed from the percentile rank of valuation, growth, financial strength, efficiency, momentum, and dividends. The score also considers the past performance of a stock in each of the component areas relative to peers.

ETFs

Dogs of the Dow

This list of DOW stocks based on H. G. Schneider’s Article in the Journal of Finance in 1951 that used price-earnings ratio. The general idea is that blue-chip companies that pay a dividend are more likely to withstand an economic downturn. The dividend score of a stock, where a score of 99 is best. This algorithm compares a company to its peers and considers the consistency of key dividend metrics as well as their direction of change. The overall score, which 99 is the best) is computed from the percentile rank of valuation, growth, financial strength, efficiency, momentum, and dividends. The score also considers the past performance of a stock in each of the component areas relative to peers.

Economic Data Calendar

We have a heavy release schedule in the first week of March, headlined by an assumed big February nonfarm payroll gain with an unchanged jobless rate at 6.3%. January reports should show solid broad-based factory shipments and orders gains, a modest narrowing in the trade deficit, and another big construction spending gain. We expect continued firm readings for the ISM and ISM-NMI in February, while the Q4 productivity figures are revised slightly higher.

Week of March 1

This last week’s spike in bond yields, and associated mortgage rate surge and stock market drop, soaring building materials prices, and adverse weather in mid-February, should all take a toll on the February data that will emerge through March. Yet, the February jobs data from the establishment survey was for the pay period including February 13, which largely predates the cold wave and rate spike. Firm establishment data in the jobs report will signal solid industrial production and income data as well, though reported figures will be impacted by late-month distortions. Consumer spending will take a hit in February, and production in the petrol-chemicals sector will be hit hard as well, though utility output will surge. On a separate front, shortages of semiconductors is depressing vehicle assemblies, providing yet another headwind for the February data.

Beyond these distortions, last week’s durable goods report, firm producer sentiment, and strong January retail sales data, all made clear that the economy was booming through January, and is likely on a strong trajectory into the end of Q1 despite February’s speed bumps. Demand for equipment is growing rapidly, and the recovery in Boeing shipments should allow all the major equipment aggregates, and not just the ex-air components, to start setting new all-time highs each month by early-Q2.

Construction Spending: 0.7%

Construction spending is expected to rise 0.7% in January after a 1.0% December increase. We expect a 1.9% private residential construction increase after a 3.1% December rise, a -0.2% decline for public construction after a 0.5% December increase, and a -0.3% private nonresidential drop after a -1.7% December decline. We expect construction spending to grow at an 6.2% pace in Q1, following rates of 17.5% in Q4 and 10.9% in Q3. Construction hours-worked from the jobs report rose 0.2% in January, and construction jobs fell -3k. The building material sales component of retail sales surged by 4.6% in January. All the housing measures have rebounded sharply since Q2 with an array of new 14-year highs across various metrics in recent months. This should translate to a lagged climb in construction spending into early-2021.

ISM/ISM-NMI: 58.7/58.5

The ISM index is expected to hold steady from 58.7 in January, down from a 2-year high of 60.5 in December, versus an 11-year low of 41.5 in April, a 14-year high of 60.8 in August of 2018, and a low from the last recession of 34.5 in December of 2008. The all-time low for the measure is 30.3 in June of 1980. The ISM-NMI index should slip to 58.5 from 58.7 in January, versus a 17-month high of 58.1 in July, an 11-year low of 41.8 in April, a 13-year high of 61.2 in September of 2018, and an all-time low of 37.8 in November of 2008. Producer sentiment has remained firm into 2021 as businesses scramble to rebuild inventories, with an added lift into 2021 from stimulus distributions and expanding vaccine availability as holiday coronavirus restrictions are eased.

Productivity, Q4 Revised: -4.7%

The GDP data imply a Q4 productivity contraction rate of -4.7% (was -4.8%), after rates 4.5% (was 5.1%) in Q3, and 10.7% (was 10.6%) in Q2. We expect a BLS output boost to 5.4% from 5.3% in Q4, after rates of 44.1% in Q3 and -36.8% in Q2. The annual payroll revisions imply no hours-worked revision in Q4 from 10.7%, after rates of 37.7% (was 37.1%) in Q3 and -43.0% (was -42.9%) in Q2. We expect downwardly-revised growth rates for compensation per hour of 1.2% (was 1.7%) in Q4, -5.2% (was -2.2%) in Q3, and 24.3% in Q2. We expect revisions for unit labor costs (ULC) to rates of 6.2% (was 6.8%) in Q4, -9.4% (was -7.0%) in Q3, and 12.2% (was 12.3%) in Q2. The big 2020 ULC and hourly earnings swings reflect erratic gyrations in the GDP compensation data through the pandemic, alongside big output and hours-worked swings.

Initial Jobless Claims: 720k

Initial jobless claims for the week of February 27 is expected to ease to 720k, after last week’s drop to 730k from 841k, though the risk is that we see a delayed pop from the Texas freeze. The usual seasonal rise in NSA claims to a peak in January before a drop into the spring should support a similar SA pattern, given the unusually high claims level and the switch since September to additive seasonal factors. We likely also saw a lift from expanded holiday coronavirus restrictions that are being unwound now. Claims are expected to average 785k in February, after averages of 852k in January, 825k in December and 749k in November. The 841k BLS survey week reading follows prior survey week figures of 914k in January, 892k in December, and 748k in November. We assume a 350k February payroll rise after the 49k January gain.

Continuing claims fell by -101k to 4,419k in the week of February 13, following a downwardly revised 4,520k figure. We expect continuing claims to fall -39k to the 4,380k area for the week ending on February 13. We expect continuing claims to extend their downtrend through Q1. Continuing claims fell -366k between the January and February BLS survey weeks. We saw prior drops of -537k in January, -767k in December, -1,734k in November, -4,924k in October, -1,745k in September, -2,459k in August, -2,280k in July, and -1,610k in June.

Factory Orders: 2.5%

Factory orders are expected to rise 2.5% in January, with a 1.4% ex-transportation increase. Shipments should rise 1.7%, while inventories remain. The forecasts reflect a 3.4% durable goods orders rise with a 1.4% ex-transportation rise and a 7.8% transportation increase. The factory goods I/S ratio should fall to a 2-year low of 1.36 from 1.38, versus 1.40 pre-pandemic readings over the four months ending in February ’20. We saw an all-time high of 1.70 in April, and a prior all-time high of 1.66 at the start of the series in January of 1992. The durable goods I/S ratio fell to an 18-month low of 1.67 in December from 1.70, versus an all-time high of 2.24 in April, and a prior all-time high of 2.05 in January of 1992. We expect significant gains in factory orders, shipments and inventories going forward as companies continue to try to rebuild inventories.

Trade Deficit: -$67.5 bln

The trade deficit is expected to widen in January to -$67.5 bln from -$66.6 bln in December and a 14-year high of -$69.0 bln in November. We expect exports to grow 1.1% to $192.1 bln, while imports grow 1.2% to $259.6 bln. The trade deficit should average -$66.6 bln in Q1, after gaps of -$66.5 bln in Q4 and -$63.4 bln in Q3. For 2021, we expect a -$61.0 bln average deficit, versus a -$56.6 bln average in 2020. A steep January petroleum price climb will boost both exports and imports of petroleum. The rapid rise in vehicle trade reversed course in January thanks to semiconductor shortages. We expect a $24 bln bilateral goods deficit between the U.S. and China with elevated import and export figures as businesses rebuild inventories. The bilateral gap previously fell between mid-2019 and March 2020 to an -$11.8 bln deficit that marked the smallest gap since 2004, versus a -$43.1 bln all-time wide bilateral gap in October of 2018.

Employment: 350k

We expect a 350k February nonfarm payroll increase, after a 49k increase in January, but a -227k decline in December. We assume a 25k factory jobs increase in February, after a -10k January drop. We assume the jobless rate will sustain the January plunge to 6.3% from 6.7% in December. Hours-worked are assumed to be flat after a 0.9% January bounce, with the workweek slipping to 34.9 from 35.0 in January. Average hourly earnings are assumed to rise just 0.1% in February, as we further unwind the December distortion that left a 1.0% earnings surge with a big drop in low-wage workers. The y/y wage gain should slip to 5.2% from 5.4%. We previously saw a 3.5% expansion-high pace for y/y wage gains in both February and July of 2019, before the pandemic-boost to an 8.0% April peak. We expect the payroll rebound to gain steam in 2021 following the winter lull, thanks to stimulus deposits and vaccines.