The weather may be warming up but economists are not quite certain how the markets are headed.
Some see an increase in consumer confidence and a healthier housing market as a sign of a rebound in growth and hiring. According to Nariman Behravesh, chief economist at consultants IHS Inc. in Lexington, Massachusetts and the top forecaster of payrolls over the last two years, “There’s going to be a bounce-back in the second quarter. The consumer is going to drive growth.”
The weakness in the rest of the economy finally caught up with the job market last month. Payrolls grew by only 126,000 in March, the smallest gain since December 2013, as the jobless rate held at 5.5 percent. The April 3 report from the Labor Department followed other statistics -- from retail sales to capital goods orders -- that pointed to a slowdown in the first quarter.
Fed Interest Rate Uncertain
The uncertainty of the Fed interest hike is making markets jittery. The stock market was closed on Friday, but in morning trading, Dow futures dropped 165 points after the report. Bonds traded in an abridged session and yields fell dramatically with the 10-year dipping below 1.80 temporarily. The dollar also weakened—as thinly staffed trading desks bet the Fed will now delay hiking rates until the second half of the year.
Leo Grohowski, chief investment officer at BNY Mellon Wealth Management believes that the poor jobs report, the weakest since December 2013, signals the Fed is likely to take its time raising rates. After the Fed's March meeting, markets read the Fed statement and forecasts to mean a rate hike in September was more likely than June. The poor jobs number reinforced the time frame as September, or even later.
Goldman Sachs economists concur, stating that while they expect the first hike in September, the weak jobs report raises the risk of an even later liftoff in rates.