Job Numbers are in!

Although the Bureau of Labor Statistics (BLS) report showed that job gains in the month of March were a strong 196,000 (which was above estimates of 170,000), a deeper look into the report shows that the overall job market is weakening. In fact, much of the strength came from growth in the government sector, which is not where we want to see the growth in the labor market come from. Further, the longer-term trend of job growth is certainly trending lower. I anticipate that we will continue to see strong reports in the form of low weekly Unemployment Claims, but that monthly growth in the labor force will tame as we roll into 2020.

The report also contains other key components that help gauge the strength of the labor market. One that is closely watched by bond investors is the Average Hourly Earnings report. Unfortunately, this rate fell from an annual growth rate of 3.4% down to 3.2%. This is good news for mortgage interest rates, as it shows that wage-based inflation isn’t much of a concern right now. If we continue to see this number low, we will likely see overall inflation levels remain low. Since inflation is the arch enemy of the interest rates, low inflation equals low mortgage interest rates.

With this report now behind us, we are going to switch to a carefully floating bias.