(Reuters) - U.S. employment growth accelerated from a 17-month low in March as milder weather boosted activity in sectors like construction, which could further allay fears of a sharp slowdown in economic growth in the first quarter.
Worsening worker shortages and lingering effects of tighter financial market conditions at the turn of the year, however, left job gains below 2018’s brisk pace. The Labor Department’s closely watched monthly employment report on Friday also showed a mild upward revision to February’s meager job gains.
** U.S. March nonfarm payrolls +196,000 vs consensus +180,000; Feb revised to +33,000 from +20,000
** March labor force participation rate 63.0% vs Feb 63.2%
** March jobless rate unchanged at 3.8%, as forecast
** U.S. March average hourly earnings all private workers +0.1%, below consensus for +0.3% and Feb’s unrevised +0.4%
STOCKS: S&P e-mini futures add to slight gains and were last up 0.26%
BONDS: 2-year and 10-year Treasury yields slip
FOREX: The dollar index is not much changed
RATE FUTURES: Fed funds contract for January 2020 unchanged
MASSUD GHAUSSY, SENIOR ANALYST, NASDAQ IR INTELLIGENCE, NEW YORK
“Looks like we got a good bounce after the jobs report, which served as a pull for the U.S. economy and obviously helped investors determine where we are on the economic cycle.
“A weak reading would’ve underscored the slowdown in the economy and would have given the Fed ammunition to sustain it’s easy money policy.
“With respect to the jobs report, after the weak Feb reading, the March report has alleviated some concerns around the job market front.”
RAHUL SHAH, CHIEF EXECUTIVE, IDEAL ASSET MANAGEMENT, NEW YORK
“The strong number should help out cyclical sectors of the market, which have compressed valuations due to recession fears. However we feel that a portion of the overall rally was based on the Fed having a more dovish view of the long term, and this soft number was more than expected but thankfully it wasn’t too much more than expected. We think it’s cushioned the upper limits of what investors are comfortable with.”
CANDICE BANGSUND, GLOBAL ASSET ALLOCATION, FIERA CAPITAL, MONTREAL
“At first glance, it’s looking like a goldilocks employment report. The stronger-than-expected headline number, obviously it’s going to be welcomed by the markets, helping to dispel some of those fears of a pronounced economic slowdown. That’s the good news. On the inflation front, that’s where the number came in on the softer side, year over year. It’s a bit more of a tame inflation or wage backdrop, which of course means less pressure on wages, allowing central banks to take a cautious and pragmatic stance toward further monetary normalization.
“The market is going to welcome this report, as a not too hot, not too cold sort of environment where growth remains healthy and strong, while central banks don’t have to aggressively tighten policy to tackle an aggressive inflation backdrop. It’s a pretty constructive report.”
“It’s a good report. It made it clear what happened last month was an aberration. On the construction side, it added 16,000 jobs and the prior month’s number was revised up so that’s good news on the supply side for housing. Overall I think recession fears have been overblown. I expect this will bump up mortgage rates only a little a bit so there should be a further strengthening in mortgage application activity after what we saw last week. People should be able do some cash-out refinancing to renovate and do repairs on their current homes. Wages are not robust, but it’s above their long-term average. The Fed won’t be worried about inflation from wages, but it will put a floor in the market that they need to cut rates.”
WIN THIN, GLOBAL HEAD OF CURRENCY STRATEGY, BROWN BROTHERS HARRIMAN, NEW YORK
“It’s a pretty mixed report. The headline was a little bit better than expected, February was revised up slightly, but obviously the average hourly earnings was a big disappointment. The key for the Fed is they need to see inflation before they feel comfortable resuming their hikes and the key to inflation is some more wage pressures, and we just haven’t seen it. It’s been kind of trying to pick up but it really hasn’t taken off the way you’d expect now that we’re near full employment. So it’s a mixed report, I think the market’s just kind of scratching its head. The takeaway for me is that it basically means steady as she goes.”
RICK MECKLER, PARTNER, CHERRY LANE INVESTMENTS, NEW VERNON, NEW JERSEY
“That’s a pretty strong number. It’s slightly higher than I expected. It’s certainly within the range of what people were predicted. It’s probably pretty much discounted into current market levels. The key for this market has been continued growth without higher interest rates. A number that indicates continued growth but isn’t high enough to force the Fed to raise rates is what the market’s looking for.”
“We’ve had six straight up days so the question is whether this isn’t already baked in to current levels.”
“The real focus of this market remains on the China negotiations. Its the only outstanding piece that could really break the market to significant new highs.”
“Investors have already taken into account the fact that the economy seems to be on path. They’re particularly encouraged that the Fed doesn’t seem interested in raising rates but that the President is so aggressively pushing them not to raise rates.”
“The mystery is a little bit why wage growth isn’t stronger. It’s hard to fully understand the lack of strength in hourly earnings. Maybe there will be a delayed reaction to this ... or maybe it says something about the ability of a global economy to keep wages in check in any one country.”
JJ KINAHAN, CHIEF MARKET STRATEGIST, TD AMERITRADE, CHICAGO
“It does seem back to normal. You saw a bounce obviously in a lot of things and it looked more normal to me. Healthcare adding a lot of jobs, we continue to see that in professional and technical services – those have been the two strongest areas of the employment market over the last year – and they both continues to do very well. Last month some of it was maybe weather related and with food services and drinking places adding 27,000 jobs, probably puts a little bit of credence in that. Along that same line the one number that disappoints me a little bit is construction because if we bounced back on that we should have also bounced backed on construction jobs too given a weather improvement.
“Wage gains were tepid is the best way you could say it and the participation rate down slightly, so we will see if that comes back. (Futures rose) because we wanted to make sure we were going to bounce back, that it was an anomaly we saw in that last jobs report and this was even better than expectation. I don’t think it changes the Fed’s position, it just says, hey we are on the path we all thought we were. That is a good thing.”
JOE MANIMBO, SENIOR MARKET ANALYST, WESTERN UNION BUSINESS SOLUTIONS, WASHINGTON
“A mixed but overall very solid jobs report. The healthy bounce back in hiring last month should help to quell recession fears. Still, weaker wage growth suggests the Fed’s December rate hike may have been its last in the current cycle, a view that won’t help the dollar.”
Americas Economics and Markets Desk; +1-646 223-6300