The U.S. Created 20,000 Jobs in February, Well Below the 180,000 Estimate… The unemployment rate fell from 4.0% to 3.8%
What it means – Snow, shutdown, misaligned stars – take your pick as to why the establishment payroll survey had such a weak showing. One thing’s for sure, no one’s buying it. The word of the day is “average,” as in, average the payroll numbers, including revisions, over several months, and treat anything really high or low as an anomaly. Adding to that sentiment, the household survey (which is where we get the unemployment figure) showed 255,000 more jobs, not 20,000. On a side note, the birth/death adjustment actually added 137,000 jobs this month on a non-seasonally adjusted basis. The report would’ve been even worse without this guesstimate.
The interesting part of this report wasn’t the headline miss, but the jump in compensation. Average hourly earnings increased 0.4% in February, which is a huge increase for one month, and stand 3.4% higher than last February, the biggest gain since 2009. That’s good news for workers.
The markets fell when the payroll number came out, but futures were already more than 100 points lower as investors fret about the global slowdown.
Auto Sales Fell to 16.5 Million Units Annually, Missing Expectations of 16.9 Million… The drop follows weaker than expected sales in December as well.
What it means – Auto sales are a large part of retail sales, so weakness in the industry will drive down other metrics. And the pain can go both ways. As Americans buy fewer cars, automakers will produce fewer units, which will eat into corporate profits, production, and the demand for wholesale goods. If the weakness continues through March, expect the current first-quarter GDP estimate of 0.3% to be “optimistic.”
December New Home Sales Up 3.7% to 621,000 Units Per Year… The report beat expectations of 590,000, but the previous two months were revised lower by a total of 71,000 units.
What it means – Making matters worse, new home sales were 2.4% lower than December of 2017, capping a pretty dismal year for real estate. The negative vibe flowed over into pricing, where the numbers were up 5% on the month, but down 7.2% for the year. At least buyers have a few more choices, as supply increased 3%.
January Housing Starts Jumped 18.6%, Recouping the Losses from December…Single-family starts increased 25%.
What it means – The dramatic rise in housing starts will give the real estate sector at least one thing to feel good about. More homes under construction should lead to more inventory available in the all-important spring selling season, which might give a spark to the otherwise moribund industry. But it’s not all good news. Combining the possibility of more inventory with lower prices for new homes in the previous note on new home sales, this could spell trouble for builders in April and May.
European Central Bank Holds Rates Steady, Restarts Loan Program… The ECB committed to holding rates steady at least through the end of this year, which was longer than expected.
What it means – The ECB is frustrated because the European economy remains stuck in first gear. After growing at more than 2% in 2017, the economy slowed down last year and is set to bump along just above the zero-growth line this year. The ECB had intended to raise short-term interest rates to something higher than negative 0.4% this year, but those sunny plans are over. Now the bank will hold rates at the current punitive level at least through the end of the year.
In a further capitulation to the economic slowdown, the ECB is restarting its targeted long-term refinancing operations (TLTROs), providing cheap funding for banks that make loans to non-financial businesses. It’s not QE, and it’s not exactly bank lending, but it does add financial liquidity at a cheap rate.
The euro dropped on the news, falling below $1.13, which pushed up the US dollar.
U.S. Government Tries to Claw Back Rail Funds from California… After California Governor Gavin Newsom announced the state would scrap most of the high-speed rail project, the Federal Rail Administration took steps to stop the current federal funding of $929 million and to get back $2.5 billion already sent to the state.
What it means – Well, that’s going to hurt. Governor Newsom reduced the project to a fraction of its original size, leaving just the beginning stretch from Bakersfield to Merced. He noted that the project was facing insurmountable legal and financing hurdles.
The Trump administration seized on a clause in the federal financing that calls for reasonable progress to end funding. If the federal government is able to end the cash flow, California will have even more trouble completing the project.
Many Democratic Presidential Hopefuls Are High On Pot…Senator Cory Booker reintroduced legislation that will make pot legal across the U.S. He’s joined by co-sponsors Kamala Harris, Kirsten Gillibrand, Bernie Sanders, and Elizabeth Warren, among others. Senator Klobuchar is not a co-sponsor of the bill but has issued a statement expressing her support for legalized pot.
Data supplied by Dent Research/Delray Beach Publishing
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