Employers in the U.S. added 103,000 workers in March, down significantly from the 326,000 that were added in February. This is only part of the story however, as other labor market indicators remained strong. The unemployment rate held steady at 4.1% and the average number of hours worked was 34.5, unchanged from the prior month. The all-important wage figure, as measured by average hourly earnings, came in at 2.7% year/year, up 0.1% from the 2.6% year/year number that was reported in February.
In all, the report was a continuation of the broad trends we have seen in recent quarters, which should allow the Federal Reserve to continue with its plan of gradually raising rates. Speaking at the University of Chicago on Friday, Fed Chair Powell seemingly agreed with this assessment. “As long as the economy continues broadly on its current path, further gradual increases in the federal funds rate will best promote these goals,” he said, referring to the balance between the Fed’s goal of 2% inflation and full employment.
Of course, exogenous factors such as trade disputes can always throw a wrench in the Fed’s plans, though recent developments are unlikely to change their course. “Tariffs can push up on prices, but it’s too early to say whether that’s going to be something that happens or not,” he said.
Bond investors agree. The equity market volatility we’ve seen in recent weeks because of “trade wars” hasn’t significantly impacted trading in the U.S. Treasury market. Longer-term yields are down slightly since the end of February, but not as much as would normally be expected when stocks are gyrating as they have been. This tells us that bond investors, like the Fed, are taking the long view.
Sources: Bloomberg, JP Morgan, WSJ
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