The U.S. Bureau of Labour Statistics released the much-awaited March jobs report this morning, and markets are moving.
Job growth failed to stage the snap back that much of Wall Street expected after an unseasonally harsh winter was said to weigh on the numbers over the past several months.
The reactions are starting to pour in. Here’s what the Street is saying.
NEIL DUTTA, HEAD OF U.S. ECONOMICS AT RENAISSANCE MACRO: “Conditions in the labour market continue to improve but remain far from good. The March employment report has something for everyone except economic growth bears. If you are a bull, aggregate hours continue to rise, supporting the idea that the weakness in Q1 was weather related and likely to be short-lived. If you are a dove on the FOMC, you can point to the rise in participation, steady unemployment rate and flat growth in earnings as a way to reiterate the idea that rate hikes remain in the distance. If you are a hawk on the FOMC, there is nothing in this report to suggest that tapering should not continue.”
MICHELLE GIRARD, CHIEF ECONOMIST AT RBS: “A very straightforward report. Nonfarm payrolls rose by 192,000, both overall and in the private sector. Both readings were in line with their 12-month moving averages (+187,000 and +189,000, respectively). Weather was still cold in March, but not as bad as February. So no weather rebound, but also no real weather drag and end up with a trend gain. The conclusion then is that employment conditions are pretty much the same as they have been last few years. This report should not move the dial in either direction for either the market or the Fed. Hours worked rebounded — this was where weather impact has been most evident. The average workweek rose to 34.5 hours, back to the level it was in November (from January-November 2013, the average workweek held between 34.4 hours and 34.5 hours). Hourly earnings were flat following a 0.4% jump last month (which we suspected was distorted by the weather, as hours worked were down due to weather but for many workers, pay was unchanged, so average hourly earnings go up). On a year-over-year basis, earnings growth slipped from 2.2% to 2.1%. While much was made of the February uptick, doesn’t appear to be much going on in terms of wage growth.”
ALAN RUSKIN, GLOBAL HEAD OF G10 FX STRATEGY AT DEUTSCHE BANK: “Mixed payrolls data work with most of the FOMC thoughts that the labour market will give them plenty of time before needing to respond to the recovery. In terms of impact, this is not a great number for rates, FX and equities vol; it will take some of the steam out of my favoured short eurodollar rate trades (though still a believer multi-month); will be helpful for FX carry, fitting in ‘sweet spot’ for EM and commodity currencies. Suspect carry shorts will still be spread between JPY, EUR and USD in that favoured order. On the positive growth side: (1) Large gains in hours worked, so the broadest measure of activity, aggregate hours worked, is up a very healthy 0.7% on the month as payback to the soft -0.1% decline in the prior month. (2) Payrolls in March were largely as expected, with upward revisions to February (now a decent 197,000) and Jan making payrolls slightly better than expected. Weather effect in prior months, notably February, is now much more muted. (3) Manufacturing hours worked were very strong, offsetting a subdued -1,000 change in manufacturing employment. Construction employment still solid despite mixed housing data. (4) The rise in the unemployment rate came in the face of a large 476,000 household employment gain. Negative side: (1) Uptick in the unemployment rate, even for ‘good reasons’ (rise in participation rate) still buys the Fed time and works with a view that participation will rise as the economy improves. (2) Broad U-6 rate up 0.1% to 12.7% is disappointing. (3) Flat hourly earnings (again distorted by large hours) taken in tandem with 0.4% prior gain works against the idea of much additional wage pressures.”
KIT JUCKES, GLOBAL STRATEGIST AT SOCIETE GENERALE: “I’ve been told I am not thumping the table much on this trip to the U.S., and have happily conceded that I am waiting for something to change, rather than sure when it will. The U.S. is generating jobs at a pace consistent with steady but unspectacular growth, the Fed has outlined its monetary policy normalisation framework, and investors have accepted it and concluded that if rates are heading to 3.5-4%, there is little to fear. The big threat to the vol-selling, carry-seeking consensus is a pickup in wage growth and hence in inflation expectations. Well, we can put that to bed for another month as wage growth dipped in an otherwise unexciting NFP report. 2.2% year over year for non-supervisory workers, 2.1% overall. Meh!!”
CHRIS RUPKEY, CHIEF FINANCIAL ECONOMIST AT BANK OF TOKYO-MITSUBISHI UFJ: “This is an important day. Keep the focus on what is right in the world. Today private payroll jobs are at all-time record highs. There are more people working today in private industry than any time in history. The labour market has returned to square one. The old peak in employment was 115 million 977 thousand jobs in January 2008 as the recession began. Today a new record at 116 million 87 thousand jobs. 110 thousand more are working today thanks to the all the stimulus policies and programs from Washington. Don’t stop now keep going. What else is on the Fed’s dashboard? The unemployment rate was 6.7% again today for March, but that is not on the dashboard anymore. First are those working part-time who want full time work. Went the wrong way today rising from 7.186 to 7.411 million. 225 thousand more. The biggest jump was from those who say there are slack work or business conditions out there. Hopefully these have not all done jail time. But hang on because private payroll employment has never been higher in the nation’s history. What else on dashboard. Wages. Tighter labour markets mean higher wages. Nope. Average hourly earnings unchanged in March up 2.1% from the last year. Not good enough, although at least it is at the Fed’s 2% inflation target.”
MILLAN MULRAINE, DEPUTY HEAD OF U.S. RESEARCH AND STRATEGY AT TD SECURITIES: “Despite the weak headline performance this was a solid labour market report, with a combined 229,000 jobs being added and rising labour market participation, the underlying tone of this report was quite encouraging. A 200,000 print on the headline number is likely to be seen as a critical hurdle for the labour market; however, given broad-based strength in this report, there is every indication that we may be well on our way to achieving this outcome very soon. The main takeaway from this report is that the labour market is continuing to bounce out of the weather-induced slump of earlier this year, and while the pace of rebound remains slower than we expected, we take encouragement from the strong showing in almost every other aspect of this report.”
HARM BANDHOLZ, CHIEF U.S. ECONOMIST AT UNICREDIT: “Another solid employment report. While the payroll gain for March was slightly lower than the consensus and our own expectations, one has to keep in mind that the numbers for previous two months were revised up by no less than 37,000. Better employment numbers for January and February (now reported 197,000), in turn, have lowered the potential for a rebound in March, which has been the primary reason for our above-consensus forecast. The average payroll gain over the past three months rose back to 178,000, in line with our 180,000 projection. In another sign that the labour market has overcome the impact from the inclement weather, average weekly hours rose back to 34.5, the highest since November. The flip side is that average hourly earnings were only flat in March, after rising a strong 0.4% in February; we had argued before that this sharp increase in February was mostly the result of fewer hours works (the denominator), and thus was likely to be reversed. The unemployment rate stayed at an unchanged 6.7%, as a whopping 476,000 increase in household employment (taken from another survey than nonfarm payrolls) almost offset a 503,000 rise in the labour force. The participation rate rose to 63.2%, the highest since September 2013. A rise in the participation rate is certainly welcome news as it suggests that some frustrated unemployed, who had stopped looking for a job, are coming back to the labour market. If this uptick in the participation rate proves to be sustainable, this would indicate growing confidence in overall job prospects that should sooner or later also be reflected in a pick-up in hiring activity.”
IAN SHEPHERDSON, CHIEF ECONOMIST AT PANTHEON MACRO: “The payroll details show a slightly smaller increase in core non-seasonally adjusted payrolls than we expected and a surprise dip in the non-seasonally adjusted birth/death contribution (75,000 compared to 92,000 in March 2013) but the seasonal factor was little changed from last year, adding a modest 23,000 compared to March 2013. Elsewhere, note the unchanged hourly earnings offset the weather-distorted 0.4% Feb gain; still no real sign of an acceleration in the trend, despite other evidence of labour market tightening. Hours worked rebounded strongly, with the 0.7% gain more than making up for the 0.1% February dip, and the workweek was strong too. Overall, then, a solid return to form. Hawks will fret over the sustained payroll strength while doves will point to the (very) tentative signs of rising participation. The jury is out, but tapering continues.”
SCOTT BUCHTA, HEAD OF FIXED INCOME STRATEGY AT BREAN CAPITAL: “Wage growth remains stagnant and underemployment is still elevated, which had led to slack in the labour markets. ‘Slack’ may well become the new buzzword for the second quarter as the markets look to evaluate structural changes in the labour markets and evaluate when the FOMC may first begin to raise rates. We remain in the ‘lower for longer’ camp as far as rates go, although we now believe that the Fed will try to wind down QE3 by the end of this year.”
CHRIS LOW, CHIEF ECONOMIST AT FTN FINANCIAL: “As in the ISM report, there was a springtime bounce in payrolls, but it wasn’t as big as expected. Treasury yields gyrated wildly in the immediate aftermath of the report, likely reflecting bulls who see weakness under the surface of winter snow and ice and bears who figure it may take a couple of months to get the economic engine turning over at the robust pace promised by Fed and Street forecasts. In the meantime, the 12-month average was 187,000, under 200,000 since November, and payrolls failed to top 200,000 for the fourth consecutive month. Year-to-date hiring is consistent with the past few years’ experience, but is not the kind of job growth you’d expect in a 3% economy.”
ANDREW WILKINSON, CHIEF MARKET ANALYST AT INTERACTIVE BROKERS: “Most sectors added a decent slew of jobs in March in a sign that employers are warming to hiring as they feel the subtleties of strengthening final demand. Retailers, for example, by adding 21,000 positions all but wiped out total losses sustained over two prior readings. Professional hiring rose by a solid 57,000, down from a February gain of 81,000, which was the strongest in exactly one year. That number included the addition of 29,000 temporary workers typically read as a precursor to sustained hiring. Construction companies added 19,000 workers while mining and logging industries added 7,000 positions. Food services companies added 30,000 positions lifting the annual change to 323,000 positions. Leisure and hospitality added 29,000 positions. Net government hiring was flat during the month.”
ADRIAN MILLER, DIRECTOR OF FIXED INCOME STRATEGY AT GMP SECURITIES: “So what does the NFP report tell us? Clearly the strong upside revision in the February report more than offset the slight miss in the March report. But we did not get the catch-up move we expected from depressed job growth in December and January, possibly due in part to the January and February revisions. So if we incorporate the March report and previous revisions we would characterise the report in aggregate as being largely in line even as the household survey recorded somewhat better results than the establishment survey. From the market’s standpoint with the labour market in better shape than initially expected as evidenced by the revisions equity prices are moving higher. And yet, the labour market is not displaying signs of being poised to record robust growth, which means a steady as she goes approach for the Fed as the probability of a first half 2015 rate hike diminished which plays well for the bond market that is seeing yields fall post report. Net net, the economy is improving and has largely moved past the weather’s negative impact and the labour market is gaining momentum albeit modestly, so all indications suggest we should be able to hit our full year GDP growth rate of +3.0% as the unemployment rate slides near 6% by year end.”
More to come as we get it…
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