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Over the past nine months, employers have been regaining some steam. But that has hit a bit a standstill as new reports surface showing that hiring was its weakest in the past nine months (over this past month). According to the Labor Department, payroll only expanded 88,000 for the past month, a number that does not include the farming industry.
By comparison to the market expectations, it was a drop in the bucket. Analysts had hoped for 200,000 in gains, about 120 percent more than what really took place. On a positive note, unemployment dropped to 7.6 percent—but was mostly attributed to people who were retiring and leaving the work force.
“The U.S. economy just hit a major speed bump,” said Marcus Bullus, trading director at MB Capital in London.
Many experts are attributing this most recent fluctuating to the new tax rate that took effect in January of this year. Due to this new employer payroll tax rate, retailers were hit the hardest, slashing more than 21,000 jobs in March; which made it the hardest hit demographic that was polled. Additionally, hiring in this sector was weaker in February and January as well.
Investors reacted to these dismal numbers, which also dropped rates of trade on related stocks and bonds. Many attribute this to the massive decline in the stock market, which was posting all time highs (since 2007) up until the past few weeks. Benchmark Treasury debt yields also suffered; and the dollar became weaker against a plethora of other currencies.
“We don’t think there is enough signal here to conclude the U.S. economy is wobbling. Rather, it appears that the underlying trend has not improved as much as the January-February data suggested,” said Julia Coronado, an economist at BNP Paribas in New York.
This could spur more economic stimulus from the Fed, found in the form of the bond-buying stimulus program.
“This could give them the green light to stay with this policy longer,” said Brian Rehling, chief fixed income strategist at Wells Fargo Advisors in St. Louis.
POSITIVE NEWS
There is some positive news to be had as well. According to the Labor Department, 61,000 more jobs (than had been estimated previously) were added during the first quarter. And the average workweek was at its highest level in more than a year. Construction added 18,000 jobs, telling of a slowly recovering housing market.
“Companies ramped up working hours instead of hiring additional people. The fact that labor demand kept rising should bode well for future job gains,” said Harm Bandholz, chief U.S. economist at UniCredit Research in New York.
