Non-farm payrolls didn’t contain any huge surprises this morning as total payrolls came in below expectations at 162k. The unemployment rate was steady at 9.7% and the U6 unemployment rose to 16.9% All in all, the report appears to be of the “ugly Goldilocks” sort – not too hot and not too cold, but just ugly enough under the surface to keep the liquidity pumps fully primed. This might have been the most highly forecast piece of data in the history of the market, but managed to surprise nonetheless. Stock futures rallied modestly on the news, but the dollar is soaring 0.7% against the Euro so action on Monday could be mixed to positive.
There were some definite positives in this morning’s report. The big jump in overall jobs was impacted less by the Census hiring than many presumed. Census hiring was only 48K in this report which implies that private sector job growth was stronger than many assumed (most analysts assumed 100K+ Census hiring). This means the Census hiring will bolster the next few reports substantially. January and February payroll reports were also revised higher with January tacking on 40K (from-26k tK +14K) and February tacking on 22K (from -36K to -14K). Despite the positives, the overwhelming negative is the continuing high level of unemployment on Main Street with U6 at 16.9% and the headline figure at 9.7%. This report is a start, but barely puts a dent in the job losses we’ve seen over the preceding 24 months.
Markets reacted very predictably to the news. Equities initially declined on the headline, but were then bolstered by news of worse than expected Census hiring which implies better than expected private sector job expansion. Bond and currency markets also read the report as being a sign of a stronger economy in the months ahead. By the end of the session S&P futures had added 4.25 points or 0.36%.
(S&P 500 Futures)
The rally in the dollar (up 0.7% vs the Euro) implies that the U.S. economy is getting stronger. Unfortunately, it also implies that Fed rate hikes are closer than many might think. The sharp move higher in the dollar is going to offset some of the move higher in equities as commodities will likely trader lower on Monday.
And for those wondering – the trading gift that keeps on giving is likely to continue Monday morning. The Monday morning melt-up is alive and well. This will make it 22 of 25 Mondays of late. Not too shabby.
The full statement by Keith Hall, Commissioner of the BLS is attached:
“Nonfarm payroll employment rose by 162,000 in March, and the unemployment rate was 9.7 percent for the third month in a row. Job gains continued in temporary help services and in health care, while job losses occurred in financial activities and in information. The March employment increase also included 48,000 workers hired by the federal government for Census 2010.
Temporary help services employment increased by 40,000 in March. Since last September, employment in this industry has grown by 313,000, or 18 percent. Health care added 27,000 jobs in March, compared with an average monthly gain of 18,000 over the prior 12 months. Mining employment rose by 8,000 in March. This industry has added 31,000 jobs since last October.
Federal government employment rose over the month, reflecting ramped-up hiring for Census 2010. In March, the Census Bureau brought on 48,000 temporary workers. Employment in state and local governments was essentially unchanged.
Manufacturing employment continued to trend up in March. Over the last 3 months, manufacturing has added 45,000 jobs, with most of the gains in durable goods industries. Construction employment held steady in March. This industry had shed an average of 72,000 jobs per month in the prior 12 months. Employment continued to decline in financial activities (-21,000) and in information (-12,000) in March. Other major industries showed little change in employment.
Average hourly earnings of all employees in the private sector declined by 2 cents in March to $22.47. Over the past 12 months, average hourly earnings have increased by 1.8 percent. From February 2009 to February 2010, the Consumer Price Index for All Urban Consumers (CPI-U) rose by 2.2 percent.
Turning to measures from the survey of households, the unemployment rate held at 9.7 percent in March. Over the month, jobless rates for the major worker groups showed little or no change. Of the 15.0 million persons unemployed in March, 6.5 million had been jobless for 27 weeks or more, an increase of 414,000 over the month. These long-term unemployed made up 44.1 percent of all unemployed persons, a record high.
The employment-population ratio was 58.6 percent in March. This measure has been trending up since its recent low of 58.2 percent in December. Among the employed, the number of individuals working part time who preferred full-time work increased in March to 9.1 million.
In summary, nonfarm payroll employment rose by 162,000 in March, and the unemployment rate held at 9.7 percent.”