Jobs numbers come in hot!
The U.S. jobs report for March came in with employers adding303,000 new positions and bringing unemployment down to 3.8% to 3.9%. Although average wage gains slowed to 4.1% from 4.3%, they did not collapse. The bottom-line takeaway is that the U.S. job market remains strong and continues to defy expectations. To underscore, the demand for workers is not outstripping supply. The combination of a steady and low level of unemployment, relatively strong real GDP growth, and moderating inflation (despite high interest rates) may drive markets higher.
The robust nature of employment is likely to mean that the Fed is less inclined to raise rates in June, with September looking more likely. Considering the strength of the U.S. labor market and the geopolitical sensitivity of oil prices (which are rising due to concerns over the Middle East), inflation is likely to remain sticky. Sugar prices are worth watching. Prices for this key commodity could be ready for a surge due to lower output in the world’s two largest producers, Brazil and India (largely due to inadequate rainfall). Brazilian supply for global markets is also pressured by the oil price rally, which has more sugar producers shifting their product to the domestic ethanol market. Americans use sugar for much of their processed food. This may add to other pressures in keeping the price of food higher for longer. It also contributes to the growing possibility that the Fed may make only one or two rate cuts in 2024, below earlier expectations of three to five.
— Scott B. MacDonald, Ph.D.
