Coffee With Greta: Strong Labor Market

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DJIA Futures: -33 (-0.1%)

SPX Futures: -9 (-0.2%)

NASDAQ Futures: -56 (-0.3%)

Good morning friends!

Futures are falling after the release of strong jobs data. 

Let’s get right to it!

Strong Private Job Growth

The U.S. private sector added more jobs than expected in March. 

Payroll firm ADP reported private employers hired 184,000 workers last month vs 155,000 expected. 

That was the fastest pace of growth since July 2023. 

Wages also rose 5.1% year over year, the same rate as February. 

ADP’s chief economist said, “March was surprising not just for the pay gains, but the sectors that recorded them. Inflation has been cooling, but our data shows pay is heating up in both goods and services.”

The leisure and hospitality sector led job gains last month, adding 63,000 workers. 

Construction added 33,000, trade, transportation, and utilities added 29,000, education and health services added 17,000, while professional and business services lost 8,000. 

This data comes ahead of the official March jobs report on Friday which is expected to show growth slowed to 200,000 jobs with the unemployment rate ticking lower to 3.8%. 

Yields Jump After Jobs Data

Treasury yields are pushing higher this morning after the release of that hotter than expected jobs data. 

The 10-year yield is up four basis points at 4.40% while the 2-year yield is up three basis points at 4.74%. 

Continued strength in the labor market is not a good sign for traders who are hoping for three rate cuts in 2024. 

Fed Speakers Dampen Rate Cut Hopes

Atlanta Fed President Raphael Bostic does not see any cuts happening this year until Q4. 

Speaking this morning, Bostic expressed concern about the continued pace of inflation and said he only anticipates one cut instead of three. 

This comes after several Fed officials have spoken so far this week. 

Cleveland Fed President Loretta Mester said on Tuesday that she still expects cuts this year but ruled out the first coming in May. 

Mester said, “I continue to think that the most likely scenario is that inflation will continue on its downward trajectory to 2 percent over time. But I need to see more data to raise my confidence.”

She indicated the long-run path of inflation is higher than officials had previously thought. 

San Francisco Fed President Mary Daly echoed that need for more convincing data that inflation has been subdued. 

Daly said, “Three rate cuts is a projection, and a projection is not a promise. We’re getting there, but it’s not going to be tomorrow, but it’s not going to be forever.”

Bostic, Mester, and Daly are all voting members of the Federal Open Market Committee this year. 

In Case You Missed It

  • Tesla (TSLA) shares dropped 4.9% on Tuesday after reporting disappointing Q1 delivery numbers. The electric automaker delivered just 386,810 vehicles in the first quarter and produced 433,371. Production was down 1.7% year over year while deliveries tumbled 8.5%. Deliveries were well below consensus estimates for around 457,000 vehicles. 

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