Week of April 29 - May 3, 2019

Maureen Kelliher, CFA

Maureen Kelliher, CFA

May 8, 2019

Weekly Economic Review

Weekly Macro Updates

Initial Jobless Claims (April 27) 215k est., 230k actual, 230k prior
Continuing Claims (Apr 20) 1660k est., 1671k actual, 1654k prior
ADP Employment Change (Apr) 180k est., 275k actual, 151k prior
Change in Nonfarm Payrolls (Apr) 190k est., 263K actual, 189K prior: R-
Unemployment Rate (Apr) 3.8% est., 3.6% actual, 3.8% prior
Average Hourly Earnings YoY (Apr) 3.3% est., 3.2% actual, 3.2% prior
Labor Force Participation Rate (Apr) 63.0% est., 62.8% actual, 63.0% prior
Nonfarm Productivity (1Q P) 2.2% est., 3.6% actual, 1.3% prior: R-
Unit Labor Costs (1Q P) 1.5% est., -0.9% actual, 2.5% prior: R+
ISM Manufacturing (Apr) 55.0 est., 52.8 actual, 55.3 prior
ISM Non-Manufacturing Index (Apr) 57.0 est., 55.5 actual, 56.1 prior
Wards Total Vehicle Sales (Apr) 17.00m est., 16.40m actual, 17.50m prior
Pending Home Sales MoM (Mar) 1.5% est., 3.8% actual, -1.0% prior
Conference Board Consumer Confidence (Apr) 126.8 est.,129.2 actual, 124.2 prior

 Strong or Improving
 Inconclusive or lacking trend
 Weak or declining
R+ Revised up
R- Revised down

Capital Market Implications

Last week, once again, there was confirmation of the exceptional strength of the US labor market, as the unemployment rate for April hit a fifty-year low (3.6%) and the economy added more than 260,000 jobs last month (far more than forecast).  At the same time, wage growth continued to increase moderately and first-quarter productivity gains were the best in five years.  However, not all of last week’s releases were sanguine; manufacturing and service PMI’s weakened further in April, vehicle sales were below expectations and the labor force participation rate declined. Going forward it will be important to see whether or not productivity gains continue.  If they do, it has proven to be a powerful support to the economy in the past.   

Although Friday’s unemployment report helped boost investors’ spirits, for the week overall, stocks hardly changed.  As such, the Dow Jones Industrial Average ended the week down slightly while the S&P 500 Index ended up slightly.  The lackluster performance of the broad based indices masked trends in the underlying sectors however, as several larger sectors such as health care and finance gained more than 1% while a few smaller sectors including media and energy lost more than -2.0%.  Foreign markets had a relatively good week, with the MSCI EAFE improving 0.3% and emerging markets rising 0.5%.  Last week, the Federal Reserve made no changes to short-term interest rates, which kept bond prices within a tight trading range. Thus bonds put in a mixed performance for the week, as 10-year municipal bonds and high yield bonds rallied while corporates and the Barclays US Aggregate Bond Index experienced modest declines.