Here is a quick look at how the U.S. attack on Syria will really impact markets in coming days, plus today’s other big surprise…
But first, a look at that jobs report…
Here is what Peter Boockvar wrote today as the world awaits the next round of monetary madness: March payrolls grew by just 98k, almost half the estimate of up 180k and the two prior months were revised down by 38k. Of this, the private sector added just 89k jobs vs the estimate of up 170k. In contrast, the household survey said 472k new jobs were created and because the size of the labor force grew by 145k, the U3 unemployment rate fell to 4.5% from 4.7%, the lowest since May 2007 and is just one tenth from matching the low in the mid 2000’s expansion…
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The U6 all in rate was down by 3 tenths to 8.9%, the lowest since December ’07 and not far from the 7.9% low in ’06. In terms of age breakdown, the job growth here was broad based with the 25-54 yr olds in particular seeing a gain of 186k. The most notable drop in the unemployment rate was for those without a high school diploma where the rate dropped to 6.8% from 7.9% but more so do to a drop in the labor force in this category (a higher minimum wage does not help the unskilled). The participation rate held at 63% while the employment/population ratio did rise one tenth to the most since February ’09 but still remains well below the ’06 peak of 63.4.
In stark contrast to what ADP said, just 6k construction jobs were added and 11k were added to manufacturing. The service side was where the real weakness was though as just 61k private sector jobs here created vs 125k in February and 153k in January. Retail, not surprisingly but distressing to see, shed 30k jobs after losing 31k in the month prior. The ‘information’ sector hasn’t seen net job growth since September.
Hourly wages were higher by .2% m/o/m and 2.7% y/o/y as expected and weekly earnings were up by .2% m/o/m and 2.4% y/o/y, pretty much in line with the modest trend. Hours worked was 34.3 and last month was revised lower by .1 to this level. Positively there was a drop in the number of those Not in the Labor Force to 94.5mm from 94.76mm last month and those discouraged fell within this.
Weather wasn’t much of a factor as 164k people with a job but not at work due to weather compares with 192k in the same month last year.
Bottom line, while disappointing, the 3 month trend of 178k is really not much different than the 187k average seen in 2016 and just confirms the slowing we’ve seen over the past few years. Monthly job gains averaged 226k in 2015 and 250k back in 2014. I want to make something very clear, we are late cycle in this economic expansion and with the unemployment rate now down to 8.9% all in and 4.5% in the widely followed U3, it is tougher and tougher to find good employees and thus it is the supply side of the equation that is the likely reason for this jobs miss relative to expectations. That said, economic growth is likely to be only about 1% this quarter and with weak productivity as almost 180k jobs per month is not adding much in terms of growth.
The 10 yr is holding the lower end of its 2.30-2.60% range after it broke below for a few minutes right after the print. I’m still bearish on bonds and don’t believe we break much below these levels. As for stocks, that tax reform better come sooner rather than later because anything that gets shifted into 2018 will just halt activity in 2017.
Regarding the U.S. attack on Syria and its impact on markets…
I have to leave the geopolitical analysis to others with what went on last night and try to focus on what impact, if any, it will have on markets. Typically these kinds of events don’t really matter more than a few days and this one definitely shouldn’t either. I went to sleep with the S&P futures down 13 pts and now they are essentially unchanged so that helps to confirm my belief. If anything, maybe some of the networks and newspapers will stop the constant, non stop Russia/Trump bedfellow reports now that the Russian’s aren’t happy with us as Assad is a buddy of theirs. Oil is up by almost 1% with the front month contract at a one month high even though Syria doesn’t produce much and gold is doing what it typically does after these type of events, trade up but those moves rarely last. The Russian Ruble is down 1% vs the dollar and the RTS stock index is lower by 2.6%.
The US invaded Iraq on March 20th 2003 with ‘shock and awe’ and the bear market ended about a week before on March 11th. Granted the market sold off about 15% from two months earlier as the war rhetoric built to its eventually beginning but all throughout that seemingly endless war, markets recovered from the rough bear that started in March 2000. Bottom line, Syria and our response will be news all day and all weekend but shouldn’t matter at all for markets. Trump’s tax plans and the direction of global monetary policy will still be the main drivers this year.
Art Cashin weighs in on Gorsuch and Syrian missile strike…
A portion of today’s note from Art Cashin: An Option Maybe, But Hardly Nuclear – Blogsites and mainstream media are awash with semi-shocked reaction to the GOP’s “historic” decision to certify Judge Gorsuch by simple majority rule. You get the impression that this move rolls back centuries of Senate tradition.
My recollection is that Clarence Thomas was approved by simple majority vote – never reaching 60 ayes. I further recall that the 60 vote target was introduced by Senator Schumer when George W. Bush was inaugurated in 2001.
I am open to corrections in case the alcohol and Alzheimers have caused a few neurons to misfire.
Questions On The Missile Strike – There are conflicting claims popping up about the overnight missile strike.
The Russians claim that the U.S. missiles did very little damage to the airport or to the equipment. They claim few, if any, planes were hit. They also claim minimal runway damage.
Away from that there are said to be blogger claims that many of the 60 or so, missiles missed the target.
So be ready for strange assertions as we move into the weekend.
Overnight And Overseas – The missile strike on Syria initially caused a flight to safety response. Gold and oil popped, accompanied by a rush into the yen. Most markets have now given back at least half of their early gains.
In Europe, markets on the continent are modestly lower but London is a touch higher as the pound weakened. Despite the volatility, volumes are low, down 20% to 30% in some markets.
Base metals tank but gold holds on to a chunk of overnight gains. Ten year yield dipped below 2.3% but now back above.
Consensus – Geo-politics may move to center stage especially with weekend looming. Break up of summit may be key event. Gut says more surprises to come.
Stick with the drill – stay wary, alert and very, very nimble.
Think of family and friends and try to have a wonderful weekend!
*ALSO JUST RELEASED: Gold Spikes On News Of U.S. Attack On Syria CLICK HERE.
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