Despite Strong Jobs Report, Fed Still Seen on Track to Cut Rates Inflation data will be key to when the Fed will lower rates.

Today’s report marks a milestone in America’s comeback. Three years ago, I inherited an economy on the brink. With today’s report of 303,000 new jobs in March, we have passed the milestone of 15 million jobs created since I took office. That’s 15 million more people who have the dignity and respect that comes with a paycheck.

My plan is to grow the economy from the middle out and the bottom up, investing in all Americans, and giving the middle class a fair shot. Unemployment has been under 4% for the longest stretch in more than 50 years. Wages are going up. Inflation has come down significantly.

We’ve come a long way, but I won’t stop fighting for hardworking families. I’m taking action to lower costs, from bringing down the price of insulin inhalers and prescription drugs to eliminating junk fees. I’m calling on large corporations to pass along their record profits to consumers. And I’ll continue to stand against Congressional Republicans’ efforts to cut Social Security, Medicare, and Medicaid and to enact massive tax giveaways for the wealthy and big corporations. (The White House)

Stocks ended solidly higher and bond yields rose Friday as Wall Street welcomed a surprisingly strong U.S. jobs report.

The S&P 500 rose 1.1%, making up most of the loss from the previous day and moving closer to its record high set last week. The benchmark index still posted its first weekly loss in three weeks.

The Dow Jones Industrial Average rose 0.8% and the Nasdaq composite gained 1.2%.

Technology companies accounted for a big share of the rally. Chipmaking giant Nvidia rose 2.4% and Google’s parent company, Alphabet, rose 1.3%.

The gains were broad, with every sector in the S&P 500 finishing in the green.

U.S. employers added a surprisingly strong 303,000 workers to their payrolls in March, according to a government report on Friday. The strong job market has helped fuel consumer spending and earnings growth for businesses, amounting to strong economic growth overall.

The robust job market has also sparked concerns about inflation creeping higher, which could delay any rate cuts by the Federal Reserve. However, Friday’s report showed that wages rose a modest 0.3% for the month, which puts less upward pressure on inflation, and Wall Street still expects the Fed to begin cutting rates in June.

Friday’s gains followed a late-day slump in stocks on Thursday after a Fed official unsettled investors by questioning whether the central bank needs to cut rates at all this year amid a strong economy.

Treasury yields climbed following the jobs report. The yield on the 10-year Treasury rose to 4.40% from 4.31% just before the report was released. The two-year yield, which moves more on expectations for the Fed, rose to 4.75% from 4.65% just before the report.

The bond market may be signaling concern about interest rates staying higher for longer, but the stock market seems to be accepting the strong jobs report as good news, with consumer spending and corporate profits remaining important for investors.

“As long as the market gets one or two cuts and the Fed doesn’t leave rates unchanged, that’s good enough for equity investors,” said Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

The Fed’s benchmark interest rate remains at its highest level in two decades as a result of historic rate hikes meant to tame inflation. The strategy has seemingly worked so far, with overall consumer prices falling drastically from a peak in 2022. Inflation fell to a rate of 3.2% in February. It was as high as 9.1% in the middle of 2022.

Strong employment and consumer spending have raised concerns about getting inflation below 3% and heading toward the Fed’s target rate of 2% won’t be easy. They also raise the potential for inflation to reheat.

The Fed and investors will get another key update on inflation next week when the government releases its March report on consumer prices.

Wall Street has a slightly better than-even bet that the Fed will trim rates at its June meeting, according to CME’s FedWatch Tool. That’s down from 65.9% on Thursday and 72% a month ago.

All told, the S&P 500 rose 57.13 points to 5,204.34. The Dow added 307.06 points to 38,904.04, and the Nasdaq gained 199.44 points to 16,248.52.

The market was mostly quiet elsewhere with the latest round of corporate earnings set to heat up in the next few weeks.

Johnson & Johnson slipped 0.1% after the pharmaceutical giant said it was buying the medical technology company Shockwave in a deal worth about $13 billion.

Apple edged up 0.5% after announcing that it is laying off more than 600 workers in California, marking its first big wave of post-pandemic job cuts amid a broader wave of tech industry consolidation. Companies in the tech sector have been slashing their workforces for two years, but the actions have had little impact on the broader employment market.

In energy markets, the price of U.S. crude oil settled 0.4% higher. It’s up just over 20% so far this year as demand remains robust.

Markets in Europe and Asia fell.

 The monthly jobs report once again defied expectations for a slowdown in hiring. But for now, a rate cut from the Federal Reserve is still in the cards for June.

The US economy added a robust 303,000 jobs in March, according to the latest report from the Bureau of Labor Statistics. That was much hotter than the economist consensus for a 200,000-job increase recorded by FactSet.

“There is no weakness in the job market which would impel the Fed to quickly cut, but no tightness which would prohibit a cut either,” says Preston Caldwell, Morningstar’s chief US economist. Though job growth was stronger than expected in the first quarter, Caldwell sees that trend turning. “We continue to expect a slowdown in job growth in the second half of 2024 through early 2025 in response to slowing economic growth over the same time frame,” he explains.

Regarding the Fed, Caldwell points to upcoming inflation data as key to its decision on cutting interest rates. “Today’s jobs data shouldn’t tip the Fed one way or another in upcoming decisions,” he says.

This coming Tuesday will bring the March Consumer Price Index report, while the Fed’s favored inflation measure, the personal consumption expenditures price index, will be released on April 26. The Fed’s next policy-setting meeting will conclude on May 1.

March Jobs Report Key Stats

  • Total nonfarm payrolls rose by 303,000, above the FactSet consensus forecast of 200,000
  • The unemployment rate edged down to 3.8% from 3.9% in February, as expected.
  • Average hourly wages grew by 0.3% to $34.69 after rising 0.2% in February.

The larger-than-expected March gain follows a 270,000 increase in February and an upward-revised increase of 256,000 in January.

Monthly Payroll Change

Caldwell notes that nonfarm payroll employment growth ticked to a 2.1% annualized rate in the three months ending in March, up from 1.6% in the prior three months. Measured year over year, job growth is 1.9%, and it’s hovered there since the second half of 2023. “In our assessment, the underlying trend for employment right now is a steady but brisk rate of growth, slightly above the 1.7% averaged over 2015-19 before the pandemic,” says Caldwell.

Healthcare, Government, and Construction Lead Hiring Gains

The March jump in hiring was led by healthcare, government, and construction, according to the BLS. Health jobs rose by 72,000 in March, above the average monthly gain of 60,000 over the last 12 months. Local government hiring grew by 49,000 and federal government hiring by over 9,000. The construction sector added 39,000 jobs, roughly twice the average monthly pace for the last 12 months.

The increase in construction hiring could be a lagged response to the nonresidential construction boom in the second half of 2023. “But construction spending has slowed in recent months’ data, which should continue in 2024, given weakness in commercial real estate markets,” Caldwell says. He also noted that over the last three months, hiring has picked up in retail and transportation. “However, growth in these areas will slow if the nascent deceleration in consumer goods demand persists.”

Selected Payroll Categories

Three-month increase.

Unemployment Rate Dips In March

The unemployment rate edged down to 3.8% in March from 3.9% in February. “The unemployment rate has been in a narrow range of 3.7%-3.9% since August 2023,” the BLS noted in the report.

Unemployment Rate

Data for the jobs report is collected in two parts. For payroll data, businesses are asked about hiring through the establishment survey. Meanwhile, unemployment data is derived from a separate survey of households. The two reports have been showing diverging trends in hiring.

“It’s hard to gauge where labor supply is coming from because the household survey has not captured the employment expansion,” Caldwell explains. “There’s a large gap between the household survey’s measure of employment and the headline nonfarm payrolls from the establishment survey. Even though that gap partially closed in March, still household employment was up just 0.4% year over year, well below the 1.9% year-over-year growth for nonfarm payrolls. The household survey is likely under-measuring immigration and perhaps gains to labor force participation.”

Wage Stats Offer Good News for Inflation Outlook

In March, average hourly earnings rose by 12 cents, or 0.3%, to $34.69. Over the past 12 months, average hourly earnings have increased by 4.1%, the BLS reported.

Monthly Wage Growth

“Wage growth remains moderate, suggesting labor supply is amply meeting demand,” Caldwell says. Average hourly earnings growth is at 4.1% both over the last three months annualized and on a year-over-year basis. Caldwell says this rate of increase is not far above one consistent with the Fed’s 2% inflation target for the PCE price index.

Fed June Rate Cut Still On the Table

Even with yet another strong jobs report, the door remains open for the Fed to lower interest rates at its June meeting. The federal-funds target rate range has been at 5.25%-5.00% since last July. However, in the bond futures market (where traders place bets on the direction of interest rates), expectations have diminished for a June cut. Before the March report, traders saw a 59% chance of a quarter-point rate cut in June, according to the CME FedWatch tool. Those odds are now down to 50%.

But Caldwell thinks the jobs report won’t take the Fed off its expected course for rate cuts in 2024. “Fed decisions in upcoming meetings will hinge mainly on the inflation data,” he says. “If the next few months show core PCE inflation averaging close to the Fed’s 2% target, as we expect, then the Fed should be clear to cut in its June meeting. Even with growth in employment and economic activity running at a healthy pace, normalizing inflation would call for the Fed to lower rates from currently restrictive levels.”

The U.S. Securities and Exchange Commission is pausing the implementation of its new climate disclosure rule while it defends the regulation in court.

Wall Street’s top regulator voted in March on the final rule, which requires some public companies in the U.S. to report their greenhouse gas emissions and climate risks. The measure faced legal challenges almost immediately.

The SEC said Thursday it had stayed the rule in part to avoid regulatory uncertainty for companies that might have been subject to the rule while litigation against it proceeds. The rule is pending review in the U.S. Court of Appeals for the Eighth Circuit.

The rule adopted in early March was watered down from what the nation’s top financial regulator had proposed two years ago after it faced lobbying and criticism from business and trade groups and Republican-led states that argued the SEC had overstepped its mandate. But that didn’t stave off lawsuits. After the final rule was approved, environmental groups including the Sierra Club also sued, saying the SEC’s weakened rule did not go far enough.

The SEC said it would continue “vigorously defending” the validity of its climate rule and believes that it had acted within its authority to require disclosures important to investors. A stay would “allow the court of appeals to focus on deciding the merits,” the SEC said in a statement.

Michael Littenberg, an attorney with Ropes & Gray and the head of the firm’s environmental, social, and governance or ESG division, said the stay was unlikely to be a factor in the ultimate fate of the SEC’s regulation.

And while some companies may delay efforts to comply with the SEC’s measure, “it’s not penciled down on climate disclosure more generally,” Littenberg said.

Companies are already collecting data and climate-related information to comply with similar rules in other jurisdictions, such as California and the European Union, which recently moved ahead with their own disclosure requirements. California’s rule has also been challenged in court.

Jon Solorzano, an attorney with Vinson & Elkins who advises companies on ESG topics, said the uncertainty surrounding the SEC’s rule presents more challenges for smaller companies than large ones.

“That’s where it gets tricky because they don’t have unlimited resources,” Solorzano said. “This is at a genuine cost to their business ... how much they should be investing in something that may or may not come to pass.”

In addition to reporting greenhouse gas emissions, the SEC rule requires U.S.-listed companies to publicly report their climate-related risks and information about their plans to transition to a low-carbon economy.

The agency dropped a requirement that would have had companies report some indirect emissions known as Scope 3. Those don’t come from a company or its operations, but happen along its supply chain — for example, in the production of the fabrics that make a retailer’s clothing.

The SEC’s reporting requirements would not have taken effect until 2026.

 Frustrated at having unsuccessfully agitated for over three years to get lawmakers to ban smoking in Atlantic City casinos, workers on Friday tried a new tactic. They filed a lawsuit to try to overturn a law that leaves casino workers as the only ones not covered by the protections of a Clean Workplace Air Act.

The United Auto Workers, which represents workers at the Bally’s, Caesars, and Tropicana casinos, and a group of casino workers opposed to smoking in the gambling halls, filed a lawsuit in state Superior Court challenging New Jersey’s indoor clean air law.

Enacted 18 years ago, the law bans smoking in virtually all indoor workplaces — except casinos.

The litigation seeks to have that exemption declared unconstitutional on several grounds, including equal protection under the law.

At a rally outside the courthouse where the litigation was filed, workers said they are employing new tactics to ban smoking in the casinos after thus far failing to convince legislators to do it.

“Today, we get off our knees and stand up!” shouted Lamont White, a dealer at the Borgata casino and one of the leaders of the employee anti-smoking movement. “We offered them the carrot, and now they get the stick!”

Whether to ban smoking is one of the most controversial issues not only in Atlantic City casinos but in other states where workers have expressed concern about secondhand smoke. They are waging similar campaigns in Rhode Island, Pennsylvania, Kansas and Virginia

Ray Jensen Jr., assistant director of the local UAW office, said the venue for the fight has shifted.

“If the legislators in Trenton won’t do their jobs, we’re going to take the decision out of their hands and into a courtroom,” he said.

Mark Giannantonio, president of the Casino Association of New Jersey and of Resorts casino, declined comment on the lawsuit. But the association opposes a smoking ban, saying that to do so would put Atlantic City at a competitive disadvantage with neighboring states that still allow smoking.

The lawsuit names Democratic Gov. Phil Murphy, whose office did not immediately return a message seeking comment, and the state’s acting health commissioner. Murphy has said he will sign a smoking ban if the Legislature passes one.

Earlier in the week, Donna DeCaprio, president of Local 54 of the Unite Here casino workers union, said Atlantic City’s core business — winnings from in-person gamblers — continues to struggle. She warned lawmakers against doing anything to make the already serious problem worse.

The union opposes a smoking ban, saying it will cost revenue and jobs and possibly force one or more casinos to close.

Only three of the nine casinos are winning more from in-person gamblers now than they did before the COVID-19 pandemic hit in 2020. Unlike in-person winnings, money won from online gambling or sports betting must be shared with outside parties and is not solely for the casinos to keep.

“Alarm bells should be ringing in Atlantic City and in Trenton as to both the short-term and long-term negative economic trends,” she said. “Representatives in the New Jersey Legislature must understand the perilous economic situation at hand for my members, and indeed all workers in Atlantic City.”

Earlier this year, state Sen. John Burzichelli introduced a bill giving the casinos much of what they want.

His measure would keep the current 25% limit of the casino floor on which smoking can occur.

However it would allow smoking in unenclosed areas of the casino floor that contain slot machines and are designated as smoking areas that are more than 15 feet (4.6 meters) away from table games staffed by live dealers. It also would allow the casinos to offer smoking in enclosed, separately ventilated smoking rooms with the proviso that no worker can be assigned to work in such a room against their will.

Workers pushing for a full ban quickly rejected that proposal.

U.S. Rep Andy Kim, a candidate for the Democratic nomination for a U.S. Senate seat, supported the casino workers.

“If I don’t want people smoking in the United States Capitol where I work, you don’t need people smoking where you work,” he said.

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