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The January jobs report was released Friday. It was a big opportunity for investors positioned for accelerating U.S. growth and inflation data.

Year-over-year jobs growth accelerated for the first time in nearly two years.

As we wrote earlier today, prior to Friday's labor market data, jobs growth had been one of the only major economic indicators still in decline. Economic data, from GDP to Industrial Production to Durable Goods, bottomed in the second quarter of 2016 and are now accelerating. In other words, jobs growth further solidified a U.S. economic trend that we’ve been noting for some time now.

Here’s a breakdown of the jobs report (see video above for more):

  • Year-over-year jobs growth accelerated to 1.64% versus 1.5% in December (after declining for 23 straight months).
  • Average hourly earnings growth (a proxy for wage growth) declined to 2.5% (year-over-year) versus 2.8% in December. Underneath this surface weakness, however, "non-supervisory" hourly earnings growth (which represents 80% of American workers) actually rose to 2.9%, a new economic cycle high. 


We recently suggested “U.S. Growth ↑ + Inflation ↑ = Buy Financials.” We’re sticking with that call here, but at the right price. The Financials sector (XLF), and our favorite big cap way to be long the group is Bank of America (BAC), is overbought today after ripping +2% on Friday. On pullbacks, however, we continue to think it’s one of the best way to play growth and inflation accelerating.