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Job Market Explodes

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What a difference a month makes. The February report revealed the largest number of jobs added since June 2016, AND inflation fears were calmed. Employers added 313,000 jobs in February, with an additional 54,000 added in the two-month revisions. Substantial gains were felt across the board, especially in key industries, such as construction, manufacturing and retail. The gain in retail is noteworthy, given continuing pressures on brick and mortar retailers. The labor force participation rate increased to 63 percent, and almost 800,000 people entered the workforce. Average hourly earnings year-over-year increased 2.6 percent after a downwardly revised rate of 2.8 percent in January. The lower wage gains reflect what most analysts had suggested – the initial report of a 2.9 percent gain in January was over-inflated due to weather issues and unusual strength in earnings for supervisory and non-production workers.

Other Key Indicators this Week:

Trade Gap – There couldn't have been a more apropos week for the trade gap report to be released. January's trade deficit widened 5.0 percent, the largest increase since 2008. Exports fell 1.3 percent, and imports were relatively unchanged. The widening was exacerbated due to recent, well-advertised tariff changes on solar panels and washing machines, which prompted foreign producers to increase shipments to the U.S. before the end of the year. The large decline in exports came from declines in capital goods and industrial exports. If we are lucky, the recent decline in the dollar could boost exports in the first quarter and help counteract any fallout from the new tariffs imposed on steel and aluminum.

Beige Book – The Federal Reserve's review of the economy in reported growth remained at a modest to moderate pace in the first two months of the year. Business in all districts reported tightness in the labor market, as employers raised wages and benefits packages. There were only a few reports of businesses raising prices to combat higher costs, but many said they plan to increase prices in coming months.

Consumer Credit – U.S. consumer debt increased $13.9 billion in January. The 4.3 percent rise was the smallest increase in four months. Revolving debt increased the least amount in almost three years, rising just 0.8 percent, signaling consumers' reluctance to take on added credit card debt. The amount of credit extended by credit unions increased $4 billion, the third monthly increase. In a related report, the amount of total household debt jumped 5.2 percent in the fourth quarter, the fastest pace in 10 years.

Strategically for Credit Unions:

Auto and mortgage loan rates continue to increase, as Treasury yields move higher in anticipation of rising inflation and Fed rate increases. Yet, the yields on investments are increasing faster than credit unions are raising loan rates. While loans are a credit union’s bread and butter, it is important to continually evaluate the total return you are getting from the loan versus an investment, which means keep an eye on delinquencies that can erode the value of your loan portfolio.

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.