Tags: jobs | report | fed | rate | cut

Jobs Report Isn't Strong Enough to Merit Fed Rate Cut

Jobs Report Isn't Strong Enough to Merit Fed Rate Cut
(Dollar Photo Club)

By    |   Friday, 05 April 2019 09:27 AM

Total nonfarm payroll employment increased by 196,000 in March following an upwardly revised 33,000 rise in February that beat market expectations of 180,000.

Notable job gains were seen in health care and in professional and technical services.

Employment growth averaged 180,000 per month in the first quarter of 2019, compared with 223,000 per month in 2018.

Average hourly “earnings” for all employees on private nonfarm payrolls rose by 4 cents to $27.70, following a 10-cent gain in February. Over the past 12 months, average hourly earnings have increased by 3.2 percent.

Keeping in mind the problem the United States has is that there is a shortage of the “right” sort of labor, these are very good numbers from the Labor Department.

The Fed will not cut rates notwithstanding that a detail in Table A-14 of the report caught my attention wherein we see that the number of employed people in 17 total overall industries went down from 6.67 million in 2018 to 6.38 million now.

Please keep in mind that today’s employment report does not include information about “wages.” It includes information on average hourly “earnings” that the Bureau of Labor Statistics repeatedly has to point out that average hourly earnings are not wages.

Wage growth in the U.S. is strong and is shown in the Employment Cost Index that was released on January 31, which showed that wages and salaries increased 3.1 percent in 2018. The next release is scheduled on April 30.

The dollar index (DXY) is for the moment at around 97.32 which is somewhat stronger than at yesterday’s close.

The overall impression is that financial markets are in a “wait and see” mode because of the “still” ongoing U.S.-China trade deal negotiations.

Anyway, in my opinion, investors should better remain as realistic as possible and keep in mind that delaying a deal is damaging, economically speaking.

Financial markets are waiting for a trade deal between the Unites States and China that could “change, if not end”, among a lot of other things, President Donald Trump’s trade tariffs on imported goods partially made in China.

China’s Vice Premier Liu He who met U.S. President Donald Trump yesterday at the White House’s Oval Office on Thursday said a new “consensus” has been reached between China and the U.S. on the text of a trade agreement that they are negotiating, CNBC reported.

President Donald Trump said yesterday that he expected a “monumental” deal with China on trade within the next four weeks with progress “being made at a very rapid pace” after the latest round of trade talks in Washington, the South China Morning Post reported.

For investors it remains important to keep in mind that financial markets “could” price in, which is of course different from “will” price in, an “anticipation” of a trade deal, which is important because that “could” imply a “sell the news” scenario for financial markets, equities, bonds, currencies, and so on, the day a deal is signed by President Donald Trump and the Chinese President Xi Jinping.

Now, without knowing the details of the deal there is still room for surprise.

In the “real” world, any delay to the trade deal is likely to continue to delay investment by companies.

Why would a large multinational company invest in the United States, or in China, or elsewhere if the security of its supply chains is called into question?

The same situation arises in the United Kingdom with the interminably tedious UK-EU divorce process. The UK Parliament is looking to prevent a “no-deal” exit, but the likelihood of a lengthy delay to the exit is increasing, the BBC reported.

While that might increase the chances of close integration with the European Union in the event that this UK-EU divorce process ever actually does end (?), why would a company commit to investing now amidst so much uncertainty?

For the moment, the British pound is quoting at around $1.3066, slightly down from yesterday’s close.

Again, this is just not about the UK as a country with a delay.

Countries like Germany are seeing weak exports because global investment remains weak. That hit German manufacturing orders data for February yesterday, although there were some positive revisions to the January data.

For investors it could be helpful to keep in mind that German data is nearly always revised positively after the initial release. 

In the meantime, I think that as an investor I would try to remain patient.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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Total nonfarm payroll employment increased by 196,000 in March following an upwardly revised 33,000 rise in February that beat market expectations of 180,000.
jobs, report, fed, rate, cut
Friday, 05 April 2019 09:27 AM
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