Expect The Congress to Embrace President Trump’s Growth Plan
$DIA, $SPY, $QQQ, $VXX, $GLD, $SLV, $USO
Friday’s monthly NFPs market moving data release attracted much less attention than in the past.
The Key jobs report reflects on the health of the US labor market in March, and it is important for assessing the underlying strength of the economy, and it has policy implications.
What this US monthly jobs report told us Friday morning, as follows:
- At 98,000 new jobs, payroll gains in March were well below consensus expectations of some 180,000 and the revised February estimate of 219,000.
- Bad weather explains only part of this big miss, but the overall picture of the labor market is not as weak as this widely cited metric would suggest.
- The 3 month MA (moving average) employment growth is almost 180,000, a solid number for this stage of an historical labor market run that has seen over 16-M jobs created since the depth of the global financial crisis in Y 2008.
- The signals of underlying strength are reinforced by declines in the widely watched unemployment rate in the less mentioned but more comprehensive U6 measure that counts more part-time and discouraged workers among the jobless, and in part-time employment overall.
- The 2.7% annual increase in wages is in line with consensus expectations, pointing to a gradual transition in the consumer growth engine that will benefit now from wage growth as well as job growth.
- Less encouraging is a labor participation rate that remains hung up at 63%, highlighting longstanding barriers to people who stopped looking for work but want to return to the labor market.
- The employment-to-population rate remains too low at 60.1, an issue that continues to hold back growth potential.
- The March jobs report warrants some caution as to how quickly the run up in sentiment measures, both for the household and corporate sectors, will translate to more favorable hard data.
- Now there will be greater pressure on Congress to move forward on the pro-growth measures advocated by the Trump Administration.
- Also, these will need to be expanded over time beyond infrastructure spending that facilitates higher private-sector production and productivity, tax reform that stimulates growth and careful deregulation that enhances efficiency without undermining soundness and safety.
Notably, the March jobs report makes policy choices somewhat more complicated for the Fed, because of the conflicting data. But it may not hobble the Fed from continuing to forecast 2 more rate hikes in Y 2017 after the Quarter-pt increase in March.
Expect these might take place in the context of a gradual change in polices aimed at the orderly normalization of interest rates and the Fed’s balance sheet, and as one prominent economist I read said, “it is one in which the Fed would continue to carefully pivot from following markets to leading them.”
As for rate hike expectations, the fed funds futures market does not expect a rate hike to be announced in May (4.3%), but expectations for a June hike have firmed a bit, with the corresponding probability rising to 70.6% from last week’s 62.5%.
- May WTI Crude Oil +1.0% at $52.25 bbl
- May Nat Gas -1.8% to $3.26 MMBtu
- June Gold + $4 at $1257.20 oz
- May Silver -1.6% to $17.96 oz
- US Dollar (.DXY) Index +0.56% at 101.23
Friday the US major stock market indexes finished the week flat at: DJIA -6.85 at 20656.10, NAS Comp -1.14 at 5877.81, S&P 500 -1.95 at 2355.54
Volume: Trade on the NYSE came in at 935-M/shares exchanged.
- NAS Comp +9.2% YTD
- S&P 500 +5.2% YTD
- DJIA +4.5% YTD
- Russell 2000 +0.5% YTD
|HeffX-LTN Analysis for DIA:||Overall||Short||Intermediate||Long|
|Neutral (0.06)||Bearish (-0.26)||Neutral (0.02)||Bullish (0.42)|
|HeffX-LTN Analysis for SPY:||Overall||Short||Intermediate||Long|
|Neutral (0.09)||Neutral (-0.14)||Neutral (0.00)||Bullish (0.42)|
|HeffX-LTN Analysis for QQQ:||Overall||Short||Intermediate||Long|
|Bullish (0.44)||Bullish (0.40)||Bullish (0.33)||Very Bullish (0.58)|
|HeffX-LTN Analysis for VXX:||Overall||Short||Intermediate||Long|
|Bearish (-0.28)||Neutral (-0.22)||Bearish (-0.32)||Bearish (-0.29)|
Have a terrific weekend.