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Weather and retail wreak havoc in March

March ended the stunning job growth of recent months. Employers added 98,000 jobs in March versus the expected 180,000 jobs. The two-month revision subtracted 38,000 jobs. Harsh weather and a decline in retail created most of the losses. Retail lost 30,000 jobs for the second consecutive month. Major retailers continue to close brick and mortar stores, as online retailers transform shopping into a “bricks to clicks” scenario. The unemployment rate fell to a two-year low of 4.5 percent. The unemployment rate sometimes seems to paint an opposite picture of the labor market. Many economists believe today’s report is simply catching up with Labor Department data, as more people find jobs and unemployment declines. Economists are suggesting today’s low unemployment rate assures a rate increase at the June FOMC meeting. A lot can change in two months.

Other Key Indicators this Week:

FOMC – Minutes from the March FOMC meeting revealed new discussions regarding reducing the central bank’s $4.5 trillion balance sheet. Most committee members agreed a policy change should be implemented this year to terminate reinvestment of both Treasury and mortgage-backed securities. Some members preferred phasing out the program gradually; others felt ending it altogether would be easier to communicate to investors. Either way, most participants felt reduction should occur in a “passive and predictable manner.” The committee will continue discussions to determine the least disruptive method for phasing out the program.

Auto Sales – The product that drove consumer spending last year is taking a hit in 2017. Auto sales fell for the fourth month in a row in March. Total sales were 16.53 million annualized units, versus 17.47 million the prior month. March was the first month since August 2013 with sales below 17 million. The top three U.S. automakers reported weaker-than-expected sales, despite continued dealer incentives. The era of cheap credit and longer loans is starting to put a dent in the auto lending arena. The 60-day delinquency rate for subprime auto loans reached its highest level in seven years, according to Fitch.

Manufacturing – The Institute for Supply Management index measured 57.2 in March, just slightly below the previous reading of 57.7. This was the seventh consecutive month the index remained above 50, the level that marks contraction versus expansion. Two of three key index variables improved markedly, pointing to continued momentum in manufacturing. The employment gauge rose four points to 58.9, the highest reading in almost six years. Prices paid increased to 70.5 from 68. The measure for orders dipped slightly to 64.5.

Between the Numbers:

Household debt topped $12.6 trillion in the fourth quarter of 2016, just shy of the historic level reached in 2008. Housing-related debt has fallen, while auto and student loans have increased. Borrowers aged 60 and older hold a greater percentage of debt than in 2008, while balances held by younger borrowers have declined.

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.

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