For some context, the report from Friday: US March non-farm payrolls +178K vs +60K expected
The jobs data was much stronger than anticipated and certainly might have shut the door on talk of rate cuts, if not already because of the US-Iran conflict in the past month. CIBC weighs in by saying that:
“Payroll employment rebounded more than expected in March and the unemployment rate edged down, something that will, temporarily at least, ease fears regarding a weakening labor market. The 178K gain in payrolls employment was well above the consensus forecast (+65K), and was offset only very slightly by cumulative downward revisions of 7K to prior months. Healthcare employment rebounded sharply following a strike-impacted February, while retail trade and transportation also saw gains following declines in the prior month.
Despite strong employment growth, hourly earnings were weaker than expected at 0.2% m/m and 3.5% y/y. While that’s not great for households, particularly given the pressures to disposable incomes from higher pump prices, it may ease concerns at the Fed regarding broader-based inflationary pressure.”
Overall, the report has something in it for everyone it would seem. In other words, the job numbers were strong enough to deter talk of a much steeper decline in labour market conditions. Meanwhile, wages were modest but not hot enough to suggest a broader pick up in inflation.
As such, the only main question is the US-Iran conflict and the broader implications of that towards the economy.
And for now, CIBC argues that it means the Fed can continue to stay on the sidelines in terms of policy setting.
“Overall though this was still clearly a better than expected report and one that justifies the current wait-and-see approach from the Fed, as it assesses how persistent the current oil price shock will be and how likely it is to spill over into other areas of inflation.”
This article was written by Justin Low at investinglive.com.
