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Jobs – The Payoff
is in the Detail

Learning Opportunities

The job report for March may look disappointing at first, but once you dig deeper, the picture is solid. The U.S. added 103,000 jobs last month, the fewest in six months. But, February's already strong gain was increased higher by 13,000 to a startling 326,000 jobs. This brings the three-month average to a respectable 202,000 jobs. The decline in March is being attributed to harsh weather and what many economists are calling "a reversion to the mean." In other words, it only makes sense that an economy close to full employment is going to have fluctuations in monthly job growth. Wages increased 0.3 percent for the month and 2.7 percent from a year ago – not enough to overheat the economy, but definitely moving in the right direction. The underemployment rate fell to 8.0 percent, and the unemployment rate remained at 4.1 percent for the sixth month.

Other Key Indicators this Week:

ISM – The Institute for Supply Management (ISM) indices for both manufacturing and service sectors declined in March, but not enough to cause concern about further weakness. The manufacturing index eased in March, primarily over concerns about the recent tariff proposals. Inventories fell, the prices-paid index increased, as did the backlog of orders. The combination of these factors suggests manufacturers are having a tough time meeting demand, rather than facing a lack of demand, from customers. The surge in pricing was the result of "panic buying" before the tariffs take effect. The story was similar with the service sector gauge, as orders moderated from the highest pace in 12 years. Yet, just as with its manufacturing counterpart, the service industry remains optimistic despite the tariff uncertainty.

Auto Sales – New car sales rebounded in March to a 17.4 million seasonally adjusted annualized rate, much better than forecast. The 2.6 percent increase from February was achieved by stronger incentives, larger fleet sales and an extra selling day. The higher-priced crossover, SUV and truck sector continues its dominance over sedans. Industry analysts estimate 70 percent of auto sales will come from the larger vehicles in the near term, especially while the cost of gasoline remains low. As car prices and interest rates increase, subprime borrowers are shifting away from new cars or loans from dealerships. In the first two months of this year, new auto sales to subprime borrowers fell nine percent.

Strategically for Credit Unions:

The proposed replacement for LIBOR in the U.S. made its debut this week. SOFR, Secured Overnight Financing Rate, is being launched as a more realistic overnight pricing alternative to LIBOR. Regulators around the world have been working on a replacement for LIBOR after it came under scrutiny for rate-setting manipulation in 2009.  Based on real transactions, versus a survey of bank estimates, SOFR is a secured rate backed by collateral. At this time, SOFR is an overnight rate only, whereas LIBOR included overnight to one-year rates. This is the first step in trying to wean trading away from LIBOR as a method for pricing loans and derivatives. How to correctly pronounce the newest financial acronym is still unclear.

Sarina Freedland –Senior Investment Officer

Although this information has been obtained from sources we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. All herein listed securities are subject to availability and change in price. Past performance is not indicative of future results. Changes in any assumption may have a material effect on projected results.