U.S. Labor Market is Strong
The U.S. Market might have passed the full employment level though economic growth has slowed in the first quarter. Equities mixed.
Tight U.S. Labor Market
Data on Thursday showed that the number of Americans filing for unemployment benefits fell last week, pointing to a persistent strength of the labor market even as economic activity appears to have slowed in the first quarter.
On Thursday, data showed a rise in the prices of imported goods in February mainly due to the weakness of the U.S. dollar, reinforcing expectations that inflation will pick up this year. A strong labor market and a steady increase in prices would be in focus in the FOMC meeting of next week.
According to the Labor Department on Thursday, for the week ended March 10, the initial claims for state unemployment benefits dropped by 4,000 to a seasonally adjusted 226,000. During the week ended February 24, claims decreased to 210,000 which was the lowest level since December 1969.
It has been the 158th straight week that claims remained below the 300,000 threshold, which is associated with a strong labor market. Such a long stretch was last seen in 1970, when the labor market was much smaller.
Fed policymakers consider the U.S. labor market to be near or even a little past full employment. The unemployment rate is sitting at 4.1%, a 17-year low. In February, the economy created 313,000 jobs. Economists are optimistic that tightening labor market conditions will boost wage growth in the second half of this year.
Equities mixed amid worries for a trade war
U.S. stocks closed with mixed results on Thursday as traders remained on edge amid the uncertainty of trade tensions.
The Dow Jones 30 finished 115 points higher after rising more than 250 points earlier in the session. The S&P 500 lost nearly 0.1%, and the Nasdaq was also down 0.2%.
According to the Wall Street Journal on Thursday, the White House is thinking about implementing tariffs on at least $30 billion of Chinese imports as part of a package of anti-China measures. Reuters also reported Tuesday that President Donald Trump may impose tariffs on $60 billion of Chinese goods.
The fear of investors now lies that other countries could retaliate by implementing their own tariffs on U.S.-made goods and sparking a trade war. Mainly, it could hurt companies that do business overseas, large multinationals like Boeing.
The Trump administration targets intellectual property theft by the Chinese government. Under this justification, the administration can include a very wide net as far as what products it can slap tariffs on.
The moves Thursday come after Wall Street saw a choppy trading day on Wednesday, with the Dow Jones industrial average closing almost 250 points down. Shares of Boeing contributed the most to the losses, as concerns that a trade war could occur between the U.S. and China came to the surface.
Inflation Data from the Eurozone
Eurozone’s final CPI for February is expected to confirm its preliminary estimate and show that inflation in the Euro area has slowed to 1.2% year-over-year from 1.3% in January.
The DAX index has posted a second straight day of gains on Thursday’s session. Currently, the DAX is trading at 12,395. Today, the focus will be on inflation indicators, with the release of the Eurozone’s final Consumer Price Index.
Last week, ECB President Mario Draghi expressed cautious optimism that inflation levels are moving higher, but added that the bank still needed to see further evidence that this was indeed the case. Draghi said that monetary policy would “remain patient, persistent and prudent”.
The Eurozone economic growth has posted its best numbers in a decade, where there is now a growing speculation that the ECB will wind up its stimulus program by September, if not earlier. However, inflation remains well below the ECB’s target of 2%, and that is why Draghi remains cautious and maintains the current monetary policy.