It's all about jobs

It's all about jobs

U.S. employment looks good, even pre-tariff; It’s pedal to the metal for U.S. trucking; The 11-country Trans-Pacific Partnership sails on without the U.S.

"The fact that wages haven't picked up does make you wonder a little bit."
Chicago Fed President Charles Evans

U.S. jobs report: Looking up The report for February contained good news in the key metrics: non-farm payrolls up 313k vs. an upwardly-revised 239k; average hourly earnings for the trailing 12 months up a solid – but unthreatening – 2.6%; labor participation rate rose to 63% from last month’s 62.7%. Another positive: This latest 4.1% unemployment rate, unchanged since last month’s – in the face of rising labor participation – suggests that the workers who have renewed their job searches may be meeting with success.

Friday’s markets greeted the report relatively gently.1 Most European equity markets closed up for the day, with the Stoxx Europe 600 up 0.4% at the close; in the U.S., the DJIA rose over 315 points at mid-day, up about 1.3%, with similar moves for the S&P500 and NASDAQ Composite indexes. However, yields for US. fixed-income markets rose resolutely on the jobs news and were above the previous days’ U.S. close in the early afternoon. The U.S. 10-year briefly crossed 2.91% on the way up and was at roughly 2.89% at mid-day. The CBOE VIX Index continued its downward trend since its February 6 high; after plunging briefly, the index was at about 15.3 at mid-day, well below the psychologically important 20 mark.

Of course, the jobs report wasn’t the only news item involving U.S. employment. The new trade initiatives of the Trump White House added a level of uncertainty to an already tumultuous debate about economic policy. In addition, the ongoing speaking engagements of Federal Reserve (Fed) officers added a level of suspense about its new tone, lexicon and future policy moves. 

Global Trade: TPP Lite Thursday saw the signing of a revised version of the Trans-Pacific Partnership, now a trade agreement among 11 Pacific Rim countries.2 Originally constructed to act as a challenge to China’s growing regional economic influence, the current version reflects the U.S. withdrawal from the agreement. With both the U.S. and China now outside the pact, it remains to be seen how the original plan will achieve its original objectives in the face of the global growth of bilateralism in trade.

U.S. Trucking: Pedal to the metal
The U.S. trucking industry, already capacity-constrained, is attempting to meet rising demand by further increasing its supply. Orders by fleet managers for “Class 8” semi-trucks, the front part of the familiar tractor-trailer combo (called articulated lorries in the European Union), rose over 75% in February vs. February 2017.3 That’s 40,200 vs. 22,880 truck orders. But it’s not just capacity driving the orders; April 1 2018 is the deadline for trucking companies to adopt electronic logs (“ELDs”) in place of paper records. But there’s little question that ELDs wouldn’t be an issue if demand was soft.


1 All data source: Bloomberg, as of Friday March 9, 2018, 12:00 – 1:00 PM ET

2 Signatory countries of the current version of the Trans-Pacific Partnership are: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

3 Source: Reuters, March 4, 2018.


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