Quick Thoughts on the US Jobs Data

One word can summarize today's report:  disappointing.   The 120k rise in the headline figure was roughly half of the whisper figure.   The unemployment rate ticked down to 8.2%, but the details are disappointing.  The household survey upon which it is based showed a decline of 31k jobs and 164k people leaving the labor force. 

The easy explanation for the disappointment is, as we noted in the preview out early in the week is the weather distortion.  It helped lift the jobs report in Jan-Feb and March is a bit of a payback.  At the same time there was some good news. Factory jobs increased by 37k on top of the 31k in February and underscores another point we have made and that is the underlying strength of the US manufacturing sector and today's report bodes well for continued increase in manufacturing output. 

Less disappointing news also comes from the hourly earnings data.  In March, hourly earnings rose 0.2%, while the February series was revised to show a 0.3% rise from the 0.1% initial increase.  This suggests that personal income may be revised higher bringing it more into line with consumption.  Today's report lifts the year-over-year hourly earnings rate to 2.1%.  The three month average stands at 2.0% down from 2.1% in both December and September of last year.  

Weekly hours were revised higher in Feb to 34.6 from 34.5, but the March reading was back to 34.5.  The Feb revisions also bode well for an upward revision to personal income figures. 

When all is said and done, the important take away is that the data is not clean and that a April report should be awaited before drawing hard conclusions.  We do not think the data is sufficient to alter views of Fed officials.  The weekly initial jobless claims and other data, like the Challenger lay-offs,suggests improvement is continuing in the labor market.  The US economy continues to expand, even if at a slower pace than Q4 11.  It still stands in stark contrasts to the euro-zone. 

The dollar dropped in thin turnover.  Sterling and the yen appeared to be the biggest beneficiaries.  Bonds rallied and the 10 bp decline in the 10-year yield brings the yield below 2.10% and the lowest since March 13.   The 2-year yield was more stable, but is still lower (marginally) then where it was a week ago.   Stocks were marked down.    We caution against reading too much into the price action, but appreciate that the weaker dollar tone was not very large or significant.  The yen is the main exception, and the dollar did fall to new lows for the week against the Japanese unit.  Bids near JPY81.30 helped stabilize the greenback, but at the low the dollar hadn't seen these levels since March 8.