The following economic awareness entry is based on short-term events and therefore should not be taken as information towards making investment decisions, which are of a long-term nature. It is only meant to provide clarity regarding current economic events, as there is often a large degree of incorrect information dispersed through the media or other sources.
Investors cheered at a reasonably solid jobs report. The February Employment Situation report showed that the economy gained 242,000 new jobs last month. That's the 65th straight month of job increases, and the trend shows that the labor market continues to improve. The headline unemployment rate remained unchanged at 4.9%; however, the labor force participation rate rose slightly to 62.9% as a greater percentage of Americans joined the labor market by working or actively looking for jobs. A declining participation rate had worried economists, and an uptick could indicate that discouraged workers are returning to the search.
The report showed that the biggest job gains were in healthcare, retail, and hospitality. The construction industry also added thousands of new jobs, which is a sign that builders expect economic demand to pick up in the coming months. Unsurprisingly, the mining sector was the biggest job loser.
However, the news wasn't all rosy.
Digging deeper into the data, we also see that wages slipped last month. Average hourly wages are up just 2.2% from 12 months ago, slower than the 2.5% rate we have seen recently and well below target rates of 3-4%. Though the decline might be a seasonal issue or involve data technicalities, it could be a sign that jobs growth isn't being reflected in wages. It could also mean that employers are offering incentives like benefits or vacation time that aren't reflected in income.
Overall, the report is a mixed bag for the Federal Reserve, though the data shows that there isn't a slowdown in the labor market and will help tamp down fears of a recession. Is a March interest rate hike in play? Realistically, the data probably isn't solid enough for the Fed, which is looking for positive economic data to counterbalance global concerns and the recent market declines. Current bets on the next hike are all over the place. Some economists believe an April or June hike is likely while some futures traders are placing bets on a November hike.
This week's economic calendar is thin, highlighted by trade data on Friday and a speech by Federal Reserve Vice President Stanley Fischer. Though the Fed isn't likely to raise rates at next month's meeting, Fischer may give some insight into the timing of the next rate hike. Most attention will be on presidential debates, caucuses, and the primary race.
Wednesday: EIA Petroleum Status Report
Thursday: Jobless Claims, Treasury Budget
Friday: International Trade
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized. Sources: Yahoo! Finance, S&P Dow Jones Indices, and Treasury.gov. International performance is represented by the MSCI EAFE Index. Corporate bond performance is represented by the SPUSCIG. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
Motor vehicle sales jump in February. Sales of cars and trucks soared by 7% last month, soaring to a 15-year high for the month of February-traditionally a slow time for auto sales.
U.S. factory activity slows for fifth straight month. A gauge of manufacturing activity shows that the sector contracted again in February, but the pace of decline slowed, indicating that relief may be on the horizon.
Beige book shows economic activity increased. A mid-quarter indicator of U.S. economic growth showed that overall activity increased, but it varied widely by region. This mixed picture may be a headache for the Fed.
Oil prices jump 10%. Benchmark oil prices logged their biggest weekly gain this year as traders digested news of falling U.S. production and possible supply freezes. West Texas Intermediate closed at $35.92 on the likelihood of lower production in the coming weeks.
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Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Diversification does not guarantee profit nor is it guaranteed to protect assets.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.
The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.
The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia.
The S&P US Investment Grade Corporate Bond Index contains US- and foreign issued investment grade corporate bonds denominated in US dollars. The SPUSCIG launched on April 9, 2013. All information for an index prior to its launch date is back teased, based on the methodology that was in effect on the launch date. Back-tested performance, which is hypothetical and not actual performance, is subject to inherent limitations because it reflects application of an Index methodology and selection of index constituents in hindsight. No theoretical approach can take into account all of the factors in the markets in general and the impact of decisions that might have been made during the actual operation of an index. Actual returns may differ from, and be lower than, back tested returns.
The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.
The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
Google Finance is the source for any reference to the performance of an index between two specific periods.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Past performance does not guarantee future results.
You cannot invest directly in an index.
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