Nonfarm Payrolls March 2019

It’s the first Friday of a new month and that has brought us another report from the Bureau of Labor Statistics in Washington, DC regarding the health of the US labor market. After last month’s meager reading on February hiring activity, markets were relieved with the most plain vanilla report that we have seen thus far in 2019. The headline figure for March jobs came in at 196,000. Meanwhile, the labor force participation rate and unemployment rate were basically static month on month at 63.0% and 3.8% respectively. The U6 rate of 7.3% and employment to population ratio of 60.6% were also essentially unchanged compared to February. Hourly wages continued to improve with a year on year increase of 3.2% and the average American worker clocked in for 34.5 hours per week in March. Sometimes dull isn’t a bad thing.

Markets continue to wrestle with the ongoing Brexit saga and US-China trade negotiations, but the key here is that we appear on track to avoid the worst of outcomes in each scenario. A no deal Brexit seems off the table for now, though Mark Carney remains concerned, and progress has been heralded on both sides of the Pacific, as it relates to the ongoing trade discussions in Washington. I mentioned Mark Carney of the BOE and I would be remiss if I did not mention the ECB or Federal Reserve in today’s short note.

Dovish policy is certainly the order of the day. The ECB seems quite far from any sort of policy normalization as Eurozone growth wanes; the Fed for its part has drastically reduced the odds of any rates hikes in 2019, stating its commitment to extending the economic recovery. Moreover, Chairman Powell is actually under some pressure to cut rates! Apparently, we weren’t so far away from neutral after all last October. One thing that did grab our attention in parsing the various economic releases in March was on the productivity front. In the fourth quarter of 2018, productivity increased 1.90%, while unit labor costs increased 2.0%. This sort of “inversion,” if you will, is something we will be keeping an eye on this earnings season and in the coming quarter should it persist. 

Market Outlook: Bullish USD, Neutral Duration, Neutral Equities