US Jobs number light
As per usual, we received the jobs figures out of the United States at 8:30 AM Friday morning, New York time. The reading was for the month of February, expected to be roughly 180,000 jobs added, coming in with an estimated 20,000. While on the surface this seems rather drastic, the reality is that the vital U6 number came in much lower, meaning that the shutdown related skewed number may be one of the excuses.
The jobs number gives us an idea as to what the possibility of price inflation will be and what has been a relatively flat inflationary environment. While the announcement has typically been very volatile, the European Central Bank may have tied the Federal Reserve’s hands by suggesting they were staying away from interest rate hikes for at least 2019, and then were starting to open up new lending programs for EU banks. In other words, they were going to stay extraordinarily dovish. This will by extension put a certain amount of bullish pressure on the US dollar by proxy. With that being the case, the Federal Reserve will be very hesitant to raise interest rates anytime soon.
Global slowdown fears
One of the most important things about the announcement was that it shows whether or not the American economy is starting to see fear creep in from global slowdown fears. Around the world, we have seen an overall slowing of economic activity in places like Italy, Germany, and even China. Overnight, there had been very poor trade balance numbers out of China, and that of course will give an idea as to how much China is exporting. As it slows down, it suggests that the global supply chain is slowing down, which of course can only be attributed to less demand.
January figures revised upward
The January figures were revised upward roughly 7000 jobs, while the December numbers were also adjusted about the same. The overall trend now seems to be positive, but it does certainly seem to be slowing down. The question now is whether or not people are going to start pricing this into various financial markets such as the US dollar, the stock markets, etc. So far, the initial shock seems to be abating as the S&P 500 was trading at 2735 as of 8:39 AM New York time, with oil trading at $55.27 at the same time, albeit having already sold off drastically during the session.
Jobs reversed to the mean
Another thing that traders are paying attention to is the fact that the lower-than-expected figure drives the overall average range to more normal numbers, so although the numbers have disappointed people, at the end of the day it’s a one off from what everybody sees, and therefore although there was an initial negative reaction, it appears that Wall Street is willing to take this number in stride. However, you can best believe that the March numbers will have to be stronger or it could really start to put bearish pressure on stock markets worldwide. Currently, it’s the United States that’s driving everything forward.
The US labor market is already tight, and wage gains continue to be a bit of an issue. While that is somewhat inflationary, the Federal Reserve is already stuck because of growth fears. This should only continue to make the situation in the financial markets even more choppy going forward.