Daily Commentary BY THE CURVE TEAM –

US Payrolls Comes In Soft & Powell’s First Speech As Chair

9th of April, 2018

Markets closed the week in a similar volatile fashion to where they started, and as we look to the week ahead, it doesn’t look to be letting up anytime soon. Trade discussions continue to overshadow other key developments. This time it was the soft US labour market data and comments from Fed Chair Jay Powell.

US-China trade discussions continue to unfold with new reports indicating the US will impose another $100bn in tariffs on Chinese imports. This tit for tat behaviour will likely continue to dominate headlines for some time.

This looked to trump some of the other developments over the course of the weekend, notably, the US employment data for March. Non-Farm payrolls came in softer last month, lifting 103k while the unemployment rate remained firm at 4.1% and wages lifted taking the annual rate to 2.7%.

While the figures look to be a bit disappointing, the print represents a more normalised figure given the blockbuster lift in February. Labour market data continues to reflect the steady as she goes mentality of the Fed, who are looking to lift rates at least a another two more times this year.

This tied in nicely with the other key event for Friday where we had Fed Chair Jay Powell make his first speech as the new Chair. While there was nothing drastic in the rhetoric, he was quick to point out that there was still a fair bit of slack in the labour market, something was that was evident in the non-farms print earlier in the day. He noted,

“The absence of a sharper acceleration in wages suggests that the labor market is not excessively tight. I will be looking for an additional pickup in wage growth as the labor market strengthens further.”

In regards to the future path for rates, it appears that at least two hikes is looking more and more likely with Powell citing that,

As long as the economy continues broadly on its current path, further gradual increases in the federal funds rate will best promote these goals.

The economy has experienced a fairly broad economic recovery over the last 12 months despite price pressures remaining subdued. The release of inflation data on Wednesday will continue to provide more colour to the pace at which the Fed tightens monetary policy.

Oliver Parsons

Client Relationship Manager