Weekly Market Commentary April 8, 2019

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The S&P 500 soared 2.1% last week. Better-than-expected economic data from the U.S. and China reduced the risk of a global recession. The global MSCI ACWI gained 2.1% as the rally was broad-based. The Bloomberg BarCap Aggregate Bond Index dropped 0.3% as interest rates rose on the positive economic news. Bond prices move in the opposite direction as interest rates.

Key Points for the Week

  • Strong U.S. job growth and improved Chinese economic data pushed markets higher.
  • U.S.-China trade talks continued, but no summit was announced.
  • Stocks rose significantly on lower recession concerns.

China reported strength in a manufacturing report that supported a global stock market rally at the beginning of last week. A strong U.S. employment report supported markets on Friday. Both the U.S. and China remain upbeat on the prospects of a trade deal, but no summit to sign the agreement was announced last week. Many had hoped a summit would be announced soon. A deal is likely in the second quarter.

Labor Market

The monthly U.S. jobs report was released on Friday, displaying a continued robust labor market. The accompanying chart shows the strength of the March data and the ongoing strength in the U.S. labor market.

After a concerning report in February, March’s job growth recovered quite nicely, beating expectations by 20,000 at 196,000 new jobs. Job gains can often be attributed to a certain industry or sector, but this report showed job creation was spread across many industries, including health care, technical and professional services, food and drinking establishments, and construction. As the bars on the chart show, there have been other months where job growth slipped, but it has recovered in the next month.

The unemployment rate remained steady at 3.8%, while the labor participation rate fell 0.2% to 63%. As the top line on the chart shows, unemployment is still hovering around 50-year lows. One reason job growth has slowed slightly from last year is the lack of available workers, as businesses continue to struggle to find qualified workers.

The lower number of available workers has helped push salaries higher. As the bottom line on the chart shows, average hourly wages grew 3.2%. The growth was slightly lower than last month but well above the rate of inflation. Employees are getting paid more, which will lead to higher consumer spending and could be a facilitator to continued economic expansion.

There are still signs of an economic slowdown, but the U.S. labor market remains robust. If the labor market can continue to stay this strong, the risk of a recession in the U.S. is lower.

Fun Story

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