U.S. JOBS: BACK ON TRACK
April 5, 2019
Friday saw a solid U.S. jobs report, with only a couple of wrinkles; Germany's manufacturing sector had a distressing February; Greece's debt crisis generated an ironic payday; Brexit hit yet another pothole.
U.S. Jobs: Back on track
March saw job growth beat expectations, up by 196,000. That's much better than the revised 33,000 gain for February. That brought the rate of job growth back in line with its long-term trend of about 180k per month. Headline unemployment stayed steady at 3.8%, extending a low last seen in the late 1960s.
Average hourly wages, however, grew a slightly less-than-expected 0.1% in March, bringing the year-over-year rise to an also-below-consensus 3.2%. And the overall participation rate fell slightly to 63.0%, largely due to drops among the 55-64 and 65-and-older groups.
Markets took the data in stride, with the yield on the 10-year Treasury returning to Thursday's level of about 2.515% after a brief spike. One explanation for the mild market reaction: the strength of job growth reduced the perceived need for a recession-preventing rate cut by the Fed during the rest of 2019.
Germany: Manufacturing angst
Factory orders for February fell -4.2% since January, vs. an expected growth of 0.3% – generating concern both in Germany and in Europe overall about the prospects for future growth. Year over year, the disappointment was worse: off by -8.4% vs. an expected -3.1%. The blow was softened somewhat by figures for current production; overall industrial production rose 0.7% in February vs. January, slightly above expectations; year-over-year, the figure was -0.4%, but still stronger than the expected ‑1.4%. Earlier in the week, Germany's Mechanical Engineering Industry Association cut its growth forecast for the year in half, to 1%.
Greece: Performance bonus
Eurozone finance ministers approved the release of €1 billion ($1.1 billion) of funds to Greece, ending the most recent debate over whether the country is sticking to its agreements on economic reforms made during the most recent bailout.
The irony: The funds come from profits earned by Europe's central banks on Greek government bonds during the country's debt crisis.
At the center of the disagreement was a reform by Greece restricting banks' power to repossess homes. Eurozone finance ministers had worried that protections for homeowners could threaten Greece's fragile banks, which have the highest ratio of nonperforming loans in Europe.
Brexit: Moving the goalposts
Prime Minister Theresa May's latest ask of the European Union is to move the "hard Brexit" deadline from this Friday, April 12 to June 30, to allow time for negotiations with Labour's Jeremy Corbyn over UK proposals for a further delay of Brexit’s implementation. The "EU27” – the European Union's 28 members minus the UK – are scheduled to meet on Wednesday, two days before the April 12 deadline, to decide on next moves.
Prime Minister May's proposal also included a request to avoid participation in the May 23 elections for European Parliament, which she described in her letter to the EU as "…in the interests of neither the United Kingdom as a departing Member State, nor the European Union as a whole…", while acknowledging that the legal obligation to participate is still in force.
All data Source: Bloomberg, April 5, 2019, unless otherwise noted.
