Author: Gregg Giboney, CFA, Timberline Investment Management
Covestor model: Dividend and Growth
On April 6, the government released its March monthly report on employment conditions. In general, the numbers were positive but potentially indicative of deceleration in the positive trend seen over the past few months. Warm weather at the start of this year is thought to be a contributing factor with fewer layoffs in January and February leading to less hiring in March.
Growth in March non-farm payroll was up 120,000. This was less than the +210,000 expectation and below the +200,000 level most see as a level that would meaningfully help employment conditions. Over the previous three months. this non-farm payroll number has had an average monthly increase of +246,000. As mentioned, weather is a contributing factor but it is difficult to specifically tell what the effect was.
The unemployment rate fell from 8.3% on February to 8.2% in March. This looks favorable but underlying statistics attribute much of this to people leaving the labor force. This is confirmed by the fact that the labor force participation rate remains very low at 63.8% which is just above the 29-year low of 63.7%.
Within the report, there was some nice growth in manufacturing jobs (+37,000). Healthcare jobs were up 26,000 but this was a sharp decline from a 71,000 increase in February. Retail jobs were down 34,000 as were temporary jobs that fell 7,500 after growing 50,000 the previous month. One of my favorite leading indicators, average workweek hours, was a disappointment in falling from 34.6 hours to 34.5 hours.
With this report, speculation of another quantitative easing from the Federal Reserve has increased but I highly doubt that they will take a single employment report to make an immediate move. Lastly, we are now entering earnings season and it will be interesting to see the numbers and commentary from company leaders on what they see in their lines of business. My expectation is that we will continue to see positive but cautious outlooks.