Expected Rebound in April’s Job Growth Not Enough to Pull Forward Rate Hike
April’s employment report (Friday) is expected to ease concerns after a weak showing in March, yet markets will be increasingly sensitive as we get another step closer to the first rate hike. Nonfarm payrolls had been stronger-than-expected in January and February, contradicting most other economic data pointing to a weak first quarter. Thus, the adjustment in March was not so surprising, albeit slightly lower than we had hoped to see. The latest FOMC statement acknowledged slower job growth and perceived underutilization of labor market resources as “little changed”, putting additional focus on this upcoming employment report for April. A recovery in labor market indicators will quickly put the Fed back on track with their labor market projections. Additional Fed speak this week will hopefully clarify rather than confuse markets on how significant of a rebound in job growth they are looking to achieve. Any data that do not constitute “further improvement in the labor market” – whether that means slower job growth, increased number of discouraged workers, or the lack of upward pressure on wages – will heighten concerns among the doves at the Fed. We have already excluded June from our list of potentials for the first rate hike, and our eyes remain focused on September. Of course, this assumes that we don’t see any more hiccups in either employment or inflation data throughout the coming months.
April’s employment report (Friday) is expected to ease concerns after a weak showing in March, yet markets will be increasingly sensitive as we get another step closer to the first rate hike. Nonfarm payrolls had been stronger-than-expected in January and February, contradicting most other economic data pointing to a weak first quarter. Thus, the adjustment in March was not so surprising, albeit slightly lower than we had hoped to see. The latest FOMC statement acknowledged slower job growth and perceived underutilization of labor market resources as “little changed”, putting additional focus on this upcoming employment report for April. A recovery in labor market indicators will quickly put the Fed back on track with their labor market projections. Additional Fed speak this week will hopefully clarify rather than confuse markets on how significant of a rebound in job growth they are looking to achieve. Any data that do not constitute “further improvement in the labor market” – whether that means slower job growth, increased number of discouraged workers, or the lack of upward pressure on wages – will heighten concerns among the doves at the Fed. We have already excluded June from our list of potentials for the first rate hike, and our eyes remain focused on September. Of course, this assumes that we don’t see any more hiccups in either employment or inflation data throughout the coming months.
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