Leading into Friday's jobs report, the general line of thinking regarding the US economy, was that manufacturing and consumer spending were an area of concern but that the labor market was healthy.
By Peter Martin
Monday, April 6, 2015
That situation has been hastily rethought in the wake of Friday's abysmal payroll data, though. Non-farm payrolls growth came in at a piddling 126,000 for March, versus a consensus estimate of 247,000. Furthermore there were substantial downward revisions to January and February, totalling a net 69,000.
Now we have a situation where the US economy appears much more vulnerable than previously thought, and this has served to push further out expectations for when the Fed will introduce a rate hike.
William Dudley, the President of the New York Fed and a permanent voting member of the FOMC, said in a speech in New Jersey today that he thought the weak start to the year was influenced by transitory factors, but stressed the data-dependent nature of the Fed's decision-making process of when to normalize monetary policy. 'The timing of normalization will be data dependent and remains uncertain because the future evolution of the economy cannot be fully anticipated,' said Mr Dudley. He suggested that growth should pick up later in 2015, but conceded that the strength of the dollar could pose a risk to this view.
As the monthly jobs report was released on Good Friday, the stock market has not had a chance to fully react at the time of writing. European stock markets do not re-open until Tuesday. The US stock market was down shortly after the open in New York: the Dow Jones was down 102 points or 0.58% at 17,660, while the S&P 500 Index fell 0.39% to 2058.9.
The dollar was trading lower on Monday, following Mr Dudley's remarks. EUR/USD was up 0.43% at 1.1018 just prior to the open on Wall Street, GBP/USD gained 0.29% to 1.4955, while USD/CAD fell 0.18% to 1.2462.
It has not all been bad news for the US economy, though, with the services sector showing strong signs of improvement. Markit's PMI for the services sector climbed to 59.2 for March from 57.1 in February, its highest level of expansion since last summer. The ISM releases its non-manufacturing index at 10.00 ET.
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