US Jobs Growth Disappoints

The US jobs growth slowed considerably more than expected in March and the disappointment pushed the dollar and equities initially lower. 

The US created 98k jobs in March, well below market expectations for around 175k jobs.  Adding insult to injury, revisions to the January and February data took off another 38k job.   Wage growth also failed to meet expectations as the year-over-year pace slowed to 2.7% from 2.8%.  

However, there were a couple of bright spots.  First, the unemployment unexpectedly fell to 4.5% from 4.7%.  This is a new cyclical low.  Most importantly, the decline in the unemployment rate was recorded even though the participation rate was unchanged at 63%.  Also, the underemployment rate fell to 8.9%, which is also a new cyclical low.  Those taking part-time work, even though full-time work is desired, fell by 151k.  

There are two drivers of the slower job growth.  First, jobs growth in January and February exaggerated the underlying of hiring.  Second, the weather seemed to skew the data.  February was the second warmest February on record, and then the winter storm that struck East Coast in March.  Both elements seemed evident in the construction sector.  After a 59k hiring spree in February, job growth slowed to a mere 6k.  Retailers also seemed to be similarly impacted.  A combination of macro considerations (slower consumption in Q1 after a robust Q4 16) and weather led to a 30k job loss.  

Meanwhile, Canada reported stronger jobs growth than expected in March, continuing the string of robust reports.  Canada created 19.4k jobs in March, more than three times the median expectation of the Bloomberg survey and more than the 15.3k jobs grown in February.  These were nearly all full-time positions.  The cloud in the silver lining was the unemployment rate, which ticked up to 6.7% from 6.6%, as the participation rate rose to 65.9% from 65.8.%.

US yields have softened, and the 10-year yield is holding a little above the 2.30% level that has represented a floor.  The dollar initially fell on the news but has recovered those initial losses.  The JPY110 continues to limit the greenback's losses against the yen.  The euro spiked to about $1.0665 before returning to the session lows near $1.0610.  The Canadian dollar is the strongest of the majors, gaining about 0.35% against the US dollar, and is trading at new highs for the week.   

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