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US Labor Market Strength Remains Intact despite Wage Slowdown

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Wage growth slowed

While job additions in March topped analysts’ estimate of 175,000, coming in at 196,000, wage growth came in below expectations. Economists had expected wages to grow 3.4% YoY (year-over-year), but actual wages rose $0.04 to $27.7, implying growth of 3.2% YoY.

The average workweek for private employees increased from 34.4 hours to 34.5 hours. An increase in the length of the workweek tends to reduce the average wage per hour.

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Unemployment rate

The unemployment rate for March remained steady at 3.8%, which remained near historic low levels. The labor force’s participation rate, however, fell from 63.2% in February to 63.0% in March.

Job additions in the first three months of the year averaged 180,000, down from last year’s average of 233,000. While job additions are slowing in 2019, they’re still strong enough to support the current pace of expansion in the economy.

The sweet spot for the Fed

The current set of data likely won’t have much of an influence on interest rates in the US economy (IVV). In its March policy meeting, the Fed indicated no rate hikes (TLT) (BND) for 2019, so the markets aren’t expecting any rate raises. In fact, the probability of a rate cut as early as 2019 is increasing. However, going by the latest jobs report, no case can be made for either an interest rate increase or a cut.

The markets seem to be in a sweet spot, which should support equities (SPY) (DIA) absent any other major shock in terms of global slowdown concerns or a negative outcome on the trade deal between the United States (VOO) and China (FXI).

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