The jobs report released at 8:30 this morning was as a good a report as we could expect, more than ten years into the US economic expansion. The headline March numbers were an increase of 196,000 non-farm payrolls and an unemployment rate holding steady at 3.8%. I have some brief thoughts on this below, as well as on the jobless claims report that came out yesterday.
Here are the key numbers for March 2019:
- 196,000 jobs vs 1777,000 expected
- Prior revisions to Jan and Feb adding a net 14,000 jobs
- 182,000 private sector jobs vs. 170,000 expected
- 3.8% unemployment vs 3.8% expected and 3.8% previous
- Labor participation rate of 63.0%, down from 63.2%
- Average hourly earnings up 3.2% y-o-y vs 3.4% expected and 3.4% previous
- U-6 unemployment rate steady at 7.3%
Overall, I would say the establishment survey data were stronger than the household survey data, which were weak. But the totality here is of a job picture that -after having weakened somewhat – is doing just fine, especially given how late in the cycle we are. Ironically, I thought the last report, where the headline jobs number was terrible, was actually pretty good. This report’s headline is very good, but the data underneath – labor participation and average hourly earnings – were a bit weak.
I would actually prefer to concentrate on the jobless claims data because I like it better as a signal. And there, the trend has turned positive. Year-on-year change numbers are negative again, with the latest report pulling the 4-week average for initial claims down to 213,5000. That’s more than 9,000 claims lower than the year-ago figure of 222,750. So the spike in jobless claims looks to have been short-lived. And that’s a bullish signal.
I would also point out that the continuing claims figure has also stabilized, with the average now at 1.743 million, just under 1000,000 less than the year-ago figure of 1.838 million.
The low level of initial claims, the falling level relative to last year, and the stabilization of continuing claims point to a job picture that has now stabilized after a difficult period during the government shutdown. It would be fair to postulate that a lot of the data set in early 2019 was negatively skewed due to the shutdown. And only now are we seeing cleaner – and better – figures.
All of this points to a sort of ‘Goldilocks’ outcome, with the US growing in the 2%ish trend range now that the Trump tax cut impact is waning. There is no indication that recession is threatening in the immediate future based on real economy data. Moreover, signals of credit distress are also lacking.The only signal that shows caution is the partial Treasury yield curve inversion. And here, I would note that the 2-10 year spread has yet to invert.
I see the US as a region of relative strength among developed economies, especially when you look to Canada, Australia, Japan and Europe, which are all showing signs of economic deterioration. Right now, the Fed is on hold. And after this report, I don’t see a change. I expect the Fed to remain with that stance for the foreseeable future.
In terms of the re-acceleration thesis, none of these numbers points discernibly in either direction. Maybe they point mildly toward re-acceleration as opposed to against it. I think we still have to wait until April to see whether the US economy has bottomed or whether there is further deceleration to come.