Market and economic update: Unemployment remains low despite lower-than-expected payroll gains

Softer-than-expected U.S. economic data have finally hit the employment market, as evidenced by the March nonfarm payrolls gaining only half of what the market expected. Payrolls grew by just 126,000 jobs and prior months saw downward revisions, with the primary decline being felt in the mining and logging sector, which also includes employees in the oil industry.

So far in 2015, payroll declines in this industry group have reversed almost 70% of the job gains the industry saw in 2014. Our view is this report likely reflects weather-related issues, as well as some impact from the West Coast dockworkers’ strike.

The unemployment rate remains low, and weekly initial jobless claims have averaged fewer than 300,000 per week for the first quarter, which is the lowest level in 15 years, indicating the jobs market likely remains quite healthy and should support further growth in consumer spending. Also, a small positive in this report was the 0.3% gain in average hourly earnings for production and nonsupervisory workers, which may indicate wage gains could see some modest lift over the rest of the year.

One concern in the U.S. market is softness in consumer spending growth, despite solid gains in personal income. The domestic savings rate is higher at 5.8%, the highest level since late 2012. For now, we believe consumers are skeptical that energy prices will remain low and are saving some of their windfall from lower oil prices.



Global stock indices have started the year strong, with many foreign stock markets beating the U.S. market. The economic front has not been so positive. Purchasing Manager Indices for the manufacturing sector have seen mixed results. Data from the eurozone point to stronger growth within its economic recovery. Data were more mixed in Asia, with stronger growth in India, slower growth in Japan and Taiwan, and softer data in China and South Korea.

Based on these data, growth outside the United States appears to be moderating, with no region showing strong growth and few showing significant contraction. The exceptions would be the economies of Brazil and Russia, both of which have suffered from the collapse in oil prices, although Russia has suffered from the additional impact of economic sanctions.

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Robert L. Haworth, CFA, is a senior investment strategist and Darrell Behnke is the Madison market leader for the Private Client Reserve of U.S. Bank.

This information represents the opinion of U.S. Bank and is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific advice or to be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation. The factual information provided has been obtained from sources believed to be reliable, but is not guaranteed as to accuracy or completeness. The organizations mentioned in this publication are not affiliates or associated with U.S. Bank in any way.

Past performance is no guarantee of future results. All performance data, while deemed obtained from reliable sources, are not guaranteed for accuracy. Indexes shown are unmanaged and are not available for investment.

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