Markets with Megan

If unraveling the complexities of the labor market and its implications on your investments is on your to-do list today, then you're in for a treat!  Megan describes an unexpected boom in job creation that's left even the optimistic forecasts in the dust.

In this episode, Megan reveals a surprising March 2024 Jobs Report. The US economy created a staggering 303,000 jobs--the most since May 2022--surpassing expectations. Megan analyzes the key sectors driving this growth, including government jobs, private education, healthcare, leisure and hospitality, construction, and trade and transportation.

Despite the strong job growth, the unemployment rate dipped slightly to 3.8%, marking the first drop in four months. We also witnessed a significant increase in the labor force, the largest in four months. However, temporary help declined, and part-time workers surged while full-time workers decreased.

Well, we've rounded out a week of surprising economic data. It's Friday, april 5th, and this is Megan Horneman, the Chief Investment Officer for Verdence Capital Advisors. We're coming to you today with our regular segment of Markets with Megan and we're going to discuss the March jobs report. This is a once-a- month report that we get. That gives us the health of the labor market and it's usually very widely monitored as well as can be a market mover, and we're seeing that today. Let's dig right into it.

This was a pretty surprising report. Jobs came in. The US economy created 303,000 jobs. It was the most since May of last year and it was a big upward surprise. The expectations were not for jobs over 300,000. The unemployment rate also did dip a tiny bit lower to 3.8%, but that was the first drop we've seen in the unemployment rate in four months. We also saw a big increase in the labor force. That was up by the most in four months as well. So let's dig into where these jobs are being created. Where it was driven was government jobs, private education and healthcare, as well as leisure and hospitality, which is back to pandemic levels, the goods producing side, as well as construction, and then trade and transportation jobs. This is where the strength was led. We did see a drop again in temporary help.

From an earnings perspective, the earnings average hourly earnings are growing 4.1% on a year-over-year basis. That's a much better than historical average number. But the Fed and investors are liking this because it's a bit slower than it was last month, when we were at 4.3 and the prior month at 4.4. And the Fed has talked about wage inflation being a sticky issue. So the fact that this came in at 4.1 percent and there was no big surprises there investors like this and we're seeing the equity market up today. This is after a lot of weakness we've seen this week. The other things that we're going to just pull apart is it was interesting to see that part-time workers they surged, while we actually, if you look at full-time workers, that actually declined and then those that are holding multiple jobs, that increased as well. So what do we make of this? What does this mean? First of all, it's a strong labor market. The Fed doesn't need to do anything right now. So you're seeing rate cut expectations now being pushed. It was March, then it was June, it was July as of yesterday, and now you're seeing the odds being pushed out to December, more in line with our view that this is going to be a second half of the year story. The inflation side of this is good, but it's not great and it still is well above what the Fed wants. It's going in the right trajectory, so we'll continue to monitor that.

There's going to be a lot of questions about immigration and what part that played in these jobs reports and what part that's going to play going forward. Unfortunately, we can't get solid numbers on whether it's worker permits or the amount of illegal immigrants that are getting work. That's something that we can't hone in on, but by looking at some of these numbers and the comments that we got from Federal Reserve Chairman Jerome Powell yesterday, that immigration is playing a part in the labor market. It is helping to bring the labor market a bit more in balance. Remember, we have the amount of job postings exceeding those that are unemployed. So the immigration is playing a part. We just can't quantify it at this time. We'll continue to monitor, though, and see if we can wrap some numbers around it. That's all we have today.

Labor market still keeps chugging along. Hourly earnings are doing well. This is keeping consumer spending supported. We'll come back with additional information next week. It's a big week with inflation. The CPI report will be out next week, so if you have any questions or comments, please feel free to reach out to podcasts at verdence dot com. Thank you so much, you.