US Jobs Growth Stalled, Prompting Retreat in Futures; Dollar Goes Down

Kristian Rouz — After the US Department of Labor published weaker-than-anticipated employment data for March on Friday, equity futures tumbled during a 45-minute trading session on Wall Street before closing for Easter holidays. The jobs data suggest the US Fed might take more time before hiking its base interest rate, making the policy move in September rather than in June, as had been projected previously.  Consequently, the dollar fell, posting a third week of slight weakening against its major peers, while US  Treasuries advanced, with yields on a 10-year Treasury bill falling to their 2-months lowest, suggesting that expansion in US economy would be more modest and less risky.

According to US Labor Department data, American employers added only 126,000 jobs in March compared to the anticipated figure of 245,000, the most modest monthly add in over a year. The actual figure, in fact, should not have been this surprising as the US governmental spending, the main driver of America's economy at this point, actually decreased by 7.3% in Q4 2014 hence the slower overall economic expansion in Q1 2015. Coupled with dire economic effects of the severe winter, the currently soft data is not a trend, suggesting the pace of employment is most likely to pick up in the upcoming months.

Nonetheless, upon hearing of the data. Investors began selling-off in earnest, with some 95,000 sell contracts signed in a 45-minutes trading session. These are thin trading volumes for Wall Street, where the average daily figure is 1.45 mln contracts; still, major US indices tumbled.

The S&P futures was 1% down, on Monday the index will open in the red. Dow futures slid 0.9%, Nasdaq futures lost some 0.8%. This means, despite that the actual stock indices remained unchanged sinse yesterday's humble gains, early Monday trading is a good time to place buying bets in select sectors.

In February, US employers hired some 264,000 people, and the weaker March data can be explained, besides weather effects and a decline in governmental spending, by a slower investment influx in the energy sector as cheaper oil suggests a halt in the previously robust expansion. Another reason is the sluggish foreign markets impacting US enterprises in a negative way. Finally a stronger dollar, having hurt US companies' overseas profits, also contributed to them hiring less personnel in the US in order to minimize costs.

The dollar, though, has retreated for a third week straight, due to investors being data-sensitive, having concluded the Fed would not hike rates in June and selling off the greenback. The Bloomberg Dollar Spot Index lost 0.8%, with the dollar sliding to its lowest against 10 major peers in one month. The euro rose 0.8% to $1.0976, while the yen rose 0.1% to 118.97 against the dollar. German and Japanese exporters will not be happy with the news, so select European and Asia-Pacific Indices may slide into the red early next week.

Now market participants are leaning towards a new consensus that the Fed is most likely to get off the near-zero ultra-low interest rate in August or September. Nonetheless, no disaster has happened, and in case the US economy continues its expansion, the rate hike might still be happening in June, the regulator is eager to start a return to normal monetary policy.

Earlier during the outgoing week, the US unemployment claims unexpectedly fell, due to a yet unknown reason. At the same time, the joblessness is at its ‘normal' rate of 5.5%. The troubled S&P 500 increased this outgoing week by 0.3% nonetheless.