Non-farm Payrolls Collapse: Morning Market Update April 3

April 3rd, 2015 by

Non-farm payrolls for March came in a half the expected number this morning, sending stocks futures and the dollar plummeting, and sparking a rush into Treasuries. U.S. markets are closed today for Good Friday, which is the only thing that has prevented a sell-off on Wall St.

The dollar dropped 1% against a basket of currencies in the aftermath of the report, while the euro gained over 1%. The yield on the 10-year T-note dropped from 1.9% to 1.8%.

This is all a result of markets expecting the dismal job growth report to push back any hikes in benchmark interest rates the Federal Reserve may have been contemplating for this summer.

Yesterday in the Markets

Stocks were up modestly yesterday, while oil and the dollar both eased. Spot gold ended Thursday down less than $1, while silver and the PGMs were down modestly.

Factors Affecting Gold Today

Wall St, COMEX and the London Metals Exchange are all closed today for Good Friday. U.S. markets will re-open on Monday, but London markets, including the gold and silver fix, will remain closed.

employment reportThe huge news today is the Bureau of Labor Statistics reporting non-farm payrolls for March rose by only 126,000. This is half the 248,000 expected, and the numbers for both January and February were revised downward for a total of 69,000 fewer new jobs. March’s report is the worst in 15 months, stretching back to December of 2013. Hourly wages increased by 7 cents, but weekly wages dropped as employers cut back on full-time positions. The unemployment rate was reported steady at 5.5%.

As expected, layoffs in the shale oil industry were a drag on the payroll numbers, as the number of “McJobs” in restaurants, bars, and hotels increased.

The labor participation rate, already at levels not seen since the “Carter malaise” days of the late 1970s, dropped again, as 96,000 more people dropped completely out of the job hunt. The seasonally-adjusted U6 unemployment rate, which counts discouraged workers, fell from 11% to 10.9%. Many analysts consider this number a more truthful representation of the job market, as those long-term unemployed do not simply disappear because they’ve been unable to find a job.

bondsThere was a huge rush into Treasuries this morning after the jobs report, as expectations of a Fed rate hike were pushed back. Those investors who were holding out for a higher yield from an expected June rate hike poured into the market, dropping the yield on the 10-year T-note from 1.9% to 1.8% in a matter of minutes.

This huge demand for U.S. bonds are causing a shortage of high-quality debt on the market, which is squeezing short-term liquidity in credit markets.

 

looking-aheadLooking Ahead

Monday will be a light day for economic reports, the most important of which will be the U.S. Non-manufacturing survey by ISM.

Developments to watch for over the weekend are attempts to scuttle the Iran nuke deal, a spread in the violence in Yemen, and further roadblocks in a debt deal for Greece.

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