March 13, 2018
The market's recent volatility has some investors spooked. But even amid this volatility, there was still some positive news last week. In today's blog, I want to help alleviate your fears and reveal the numbers behind why I foresee a full recovery on the horizon…
Early last week, Wall Street remained distracted by President Trump's proposed steel and aluminum tariffs. But, by the end of the week, the Labor Department's unemployment rate report for February stole the spotlight—and drove the broader indices higher.
The Labor Department reported that 313,000 payroll jobs were created in February, well above economists' estimates for 205,000 jobs. Plus, December and January's payroll reports were revised up by a cumulative 54,000 jobs. What this means is that an average of 242,000 jobs were created per month in the past three months, and those are some solid numbers.
Also notable, labor force participation surged 63% last month, up from 62.7% in January, as more workers joined the labor force. The unemployment rate remained steady at 4.1% for the fourth-straight month. Average hourly wages only rose by 0.1% in February, or $0.04, to $26.75 per hour, and decelerated to a 2.6% average annual pace in the past 12 months. So there isn't significant wage inflation yet.
This was a stunning payroll report, and Wall Street was still basking in its glow in early trading yesterday morning. I look for this trend to continue in the upcoming weeks, especially after a dovish Federal Open Market Committee (FOMC) statement next week. With a lack of wage inflation in last week's payroll report, I'm growing more certain that the Fed will hesitate at raising key interest rates later this year.
Assuming the Fed follows through with a reassuring dovish FOMC statement, the last 10 trading days in March should be especially strong as quarter-end window dressing and the 90-day realignment of smart Beta ETFs will get underway at the end of this month.