The U.S. Economy Created 196,000 Jobs in March… Friday’s report beat expectations of 175,000 and the unemployment rate steadied at 3.8%.
What it means – This a nice comeback following February’s dreadful 20,000 hires (now revised upward to 33,000). Last month’s bad showing combined with all the wonkiness in interest rates led many to worry about an imminent recession. Today’s numbers will put some of that aside. But we’re trending in the wrong direction.
For the quarter, the economy has added an average of 180,000 jobs. That’s a respectable number, but down from last year, which kicked off the first three months of the year with a monthly average of 223,000.
On the wage side, earnings fell below expectations, growing just 0.1% as the annual increase slid to 3.2%.
The markets reacted positively to this news Friday and pushed fears of an economic slowdown.
The U.S. and China Made Significant Progress in Trade Talks… Administrative officials from Economic Advisor Larry Kudlow on down commented on positive progress in the trade talks, giving the impression that an end to the trade war is near.
What it means – Investors keep pushing the U.S. and Chinese markets higher based on optimism for a deal. The S&P 500 is up more than 13% this year, while the Shanghai is up almost 30%. But then what? The Chinese economy is still losing steam, and the U.S. economy looks like it will expand by less than 2% in the first quarter and earnings growth will turn negative.
With Brexit looming and weak growth across Europe to boot, a trade deal with China could be a great time to protect gains rather than add to positions.
February Retail Sales Down 0.2%, Missing Expectations of a 0.3% Rise… January retail sales were revised up from 0.2% to 0.7%
What it means – Averaging the two results is 0.25% growth each month. Not great, but not negative. Still, for February, the closer you look, the worse it gets. Excluding autos, retail sales fell 0.4%, and if you strip out autos and gas, sales dipped 0.6%. Those aren’t results that will make retailers sleep well at night. It goes a long way in explaining why earnings look thin for the first quarter.
As noted, auto sales were a bright spot in the report, and will be a bright spot in the March numbers as well. Auto unit sales increased from 16.5 million in February, which is included in this report, to 17.5 million in March, which will help if consumers remain on the sidelines in other areas.
Durable Goods Orders Fall 1.6%… Aircraft orders dragged down the report. Excluding aircraft, orders were up 0.1%.
What it means – Drilling down further to core capital goods (a proxy for business spending), orders fell 0.1%, which was below the estimate of up 0.2%. Shipments of core capital goods were off pointing to weakness in business spending at quarter end. This is a turn from growth at the end of 2018 and in January, to the modest growth in February, and now contraction. It could be a rough second quarter if orders don’t turn around.
Brexit Still Up in the Air… British Prime Minister Theresa May submitted her proposal for leaving the EU for the third time and lost again. Members of Parliament offered several other proposals. None gathered enough votes to move forward.
What it means – The EU informed May that if her deal wasn’t approved, then Britain would have to leave the EU by Friday, April 12. Now May is conferring with Jeremy Corbyn who leads the opposition Labor Party, trying to find anything that resembles middle ground. It’s likely that there will be another extension. The situation changes by the day.
The only constant is that Parliament has voted not to leave with a hard Brexit, with no trade or border deals in place. And yet, without any proposal gaining steam, a hard Brexit is exactly where they are headed.
Cryptocurrencies: Are They Stocks, or What?… Bitcoin is supposed to operate like money, even though almost no one tries to buy stuff with it. Instead, it acts like a digital investment. Still, the U.S. regulatory world considers bitcoin and some of its brethren assets like gold.
But other digital coins as they are called operate like stock. Holders buy them, and the profitability of the companies that issued them determines the coin’s value. If that sounds like a stock to you, then you’re not alone. The SEC agrees, and it frowns on companies issuing stock in the form of coins without going through the registration process and following the rules. If you own any of these, be careful.
As for bitcoin and the others, if you exchanged them for anything last year, like a sandwich or a car, check with your accountant. You might have to list every transaction for tax purposes as a capital gain or loss.
Thieves Steal Knives from Amnesty Box in Britain… The U.K. has a problem with knife violence. Because guns are so difficult to get, criminals turn to the next thing. In one area, knife crime increased 52% over last year, so authorities installed a knife drop-off amnesty box. Anyone could put a knife in the box, no questions asked. Apparently, other criminals thought that was a good place to get knives, so they cracked open the box and took the contents.
Lucky for authorities, they found the knives a short distance away and have the entire incident on CCTV. Apparently, no one thought putting up a sign saying, “Drop your knives here,” doubled as an advertisement for those who wanted knives. Along with their counterparts in Australia, members of Parliament have failed to notice that guns weren’t the problem. It’s criminals that cause crime.
Data supplied by Dent Research/Delray Beach Publishing
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