NEW YORK – U.S. job growth continued at a brisk clip in March, with the unemployment rate falling to a new two-year low of 3.6% and wages re-accelerating, positioning the Federal Reserve to raise interest rates by a hefty 50 basis points in May.
The Labor Department’s closely watched employment report’s survey of establishments showed that nonfarm payrolls increased by 431,000 jobs last month.
Data for February was revised higher to show 750,000 jobs added instead of the previously reported 678,000. Economists polled by Reuters had forecast payrolls increasing 490,000. The unemployment rate dropped to 3.6%, the lowest since February 2020, from 3.8% in February. Story: Table:
MARKET REACTION:
STOCKS: S&P e-mini futures pared a slight gain and were last up 0.3%, pointing to a steady open on Wall Street
BONDS: The yield on the benchmark 10-year note rose to 2.4152%; Two-year Treasury yields rose to 2.4239%, slightly inverting the yield curve
FOREX: The dollar index was little changed up 0.23%
COMMENTS:
ANTHONY SAGLIMBENE, GLOBAL MARKET STRATEGIST, AMERIPRISE FINANCIAL, DETROIT
“Today’s report suggests that the labor market should continue to do well, and that’s a great fundamental support for the (stock) market, and in terms of the inversions, the market can look through some of these yield curve inversions, and I would only become more concerned if a greater number of points on that yield curve started to invert. That’s when the market would become more concerned, you’d see buy the dip behavior wane, we’d see investors become more conservative and maybe even more fearful of a recession. But right now, with just a couple of points moving into inversion and then back out, investors should discount that for now and look at the still strong fundamentals in the economy.”
RANDY FREDERICK, MANAGING DIRECTOR, TRADING AND DERIVATIVES, SCHWAB CENTER FOR FINANCIAL RESEARCH
“This was a pretty solid report that was pretty much expected. Inflation is still problem obviously. It certainly doesn’t change the Fed’s actions or what the Fed’s likely actions are going to be. I think that we’ve already kind of been told not explicitly, but pretty close to that, that we’re going to get a half point right rate hike on May 4.”
“We got PCE numbers yesterday, that show the inflation is still pretty high but we had wages go up about the same amount. So I don’t think that this really changes a whole lot of anything.”
MARVIN LOH, GLOBAL MACRO STRATEGIST, STATE STREET, BOSTON, MASSACHUSETTS
“From the perspective of the Fed and inflation, maybe it was a little bit too good of a number. But based on the fact that the employment rate continued to go down, the number of people coming back into the workforce is keeping pace with the jobs out there, and a rebound in the earnings number shows that the pace of wage gains is continuing although a little bit slower as we get towards a more normalized number.”
JUAN PEREZ, DIRECTOR OF TRADING, MONEX USA, WASHINGTON
“The good job figures mean that the U.S. economy has been resilient to the negative impact from the conflict as the post-pandemic recovery remains strong. The Fed will certainly feel pressure to stay the course on its hike path although now many doubt the global economy should be taking in higher borrowing costs. We believe the buck will continue to be volatile and be pulled in different directions as long as there remains a lack of clarity on how long the war will go on.”
JIM PAULSEN, CHIEF INVESTMENT STRATEGIST, THE LEUTHOLD GROUP, MINNEAPOLIS
“It’s a decent wage increase but it’s not frightening, like wage costs running out of control. You had a little bit of an uptick in the participation rate, which again, was good.”
“What it does is quell fears the economy is falling off a cliff. This is a very good report and it didn’t deliver an overheated blow either. It’s kind of benign but a little on the positive sign. It might lift GDP estimates for the quarter which could affect earnings estimates.”
“It helps reduce fears the economy is really slowing or weakening. It’s not. At the same time it doesn’t add to inflation fears in a dramatic way.”
“I don’t see where this is a market moving report. It’s not an outlier. It wasn’t super strong or super weak.”
KARL SCHAMOTTA, CHIEF MARKET STRATEGIST, CORPAY, TORONTO
“Another strong print is sustaining expectations for two or more jumbo-sized Fed hikes in the coming months, and has added to momentum driving the dollar higher. Global risk sentiment continues to deteriorate and lift the greenback as hopes for a ceasefire in Ukraine fade, while commodity-linked currencies are coming under pressure as policy changes cap the potential for further gains.”
PAUL NOLTE, PORTFOLIO MANAGER, KINGSVIEW INVESTMENT MANAGEMENT, CHICAGO
“The data suggests that the labor market is still very strong. The underlying indication is that the economy remains very strong.”
“With the wage growth of 5% plus y-o-y for probably the second or third month in a row – the risks now of wage price spiraling higher are increasing. It increases the chance that the Fed goes 50 basis points at their next meeting in May. The Fed is going to be focused a lot more on inflation at this point, and will be looking to raise rates.”
“I think the economy is still very strong and the Fed should feel comfortable in raising interest rates at this point, at least initially, without fearing that they’re going to dump the economy into a recession.”
OLIVER PURSCHE, SENIOR VICE PRESIDENT, WEALTHSPIRE ADVISORS, WESTPORT, CONNECTICUT
“There doesn’t seem to be anything overly surprising in the jobs report, other than it being relatively strong. Overall, this is a positive report for investors. The U.S. economy, despite COVID and related headwinds that persist and global events that are driving inflation, is very resilient, and that’s a good thing. And that bodes wells for the upcoming earnings season, which is ultimately going to be the big driver of market returns.”
SHAWN CRUZ, DIRECTOR OF DERIVATIVES STRATEGY, TD AMERITRADE, CHICAGO
“It was the wage increase, it wasn’t awful but if there was one thing I noticed yesterday was when we got the income and expenditures was that there was a little bit of a slowdown in spending and some people could view that as just not keeping up with inflation. And it doesn’t look like the wage growth here was quite enough to keep up with some of the inflation we are seeing either, so there is a little bit of concern around what does that mean for consumer spending, that is one area that might create some concern.”
“Generally speaking, there was a little bit of an expectation that maybe a lot of this inflation was going to start pulling people back into the labor market, getting more people back to work, and undershooting that a little bit is another area where there is going to be a little bit of concern as well. But there is still enough of a wage increase component in this – average hourly earnings were up 5.6% – which is still a decent jump where that keeps the Fed in the spot where that is still inflationary and that is still going to keep the expectation that everyone had before that they are going to have to tighten in place.”
“Right now the catalyst is wages not keeping pace with inflation but inflation also forcing the Fed to continue to have to tighten policy aggressively.”
PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK
“It’s decent report, but it carries wage pressures and a half-percent (interest rate) rise at (the Fed’s) May meeting is a near certain. And if inflation accelerates even further then at the June meeting, we’re looking at another half-percent rise.”
“Basically, the report is good, but it just means the Fed is going to get more hawkish.”
“In terms of the market, it’s coming off a little bit. Yields are moving higher the dollar is moving higher. It’s the beginning of a new quarter, we’ll probably have a mixed to positive trading session based on the news.”
(Compliled by the global Finance & Markets Breaking News team)
