Pro Perspectives 4/6/23

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April 6, 2023
 
Stocks are closed tomorrow for Good Friday.  But we will still get the March jobs report at 8:30.
 
With this jobs report in mind, remember, it was mid-March that bank runs started on a few vulnerable venture capital related banks.  Not only did that send shock waves through the banking sector, but it had a clear and direct blow to the technology sector. 
 
It was safe to assume, that confidence shock had a direct and indirect effect on jobs.  And we’ve already seen it reflected in some March employment data. 
 
The ISM services employment index for March came in quite a bit weaker than the prior reading.   
 
Wednesday’s ADP jobs report for the month of March was weak.  In fact, it showed the second weakest job gains in more than two years.
 
And as you can see in the chart below, the six-month rolling average of jobs added in the ADP report, have been going one direction since the Fed started raising rates last year (down).  This average has returned to pre-covid norms.
Of course, the Fed has explicitly threatened jobs along the path of its inflation fight.  
 
And Jerome Powell has specifically targeted the mismatch between job openings and job seekers.  We heard more on that front earlier this week.  It was February data (prior to the banking fallout), but already nearly a million jobs had evaporated.  This job openings/job seekers ratio has probably since collapsed. 
So, this brings us to tomorrow morning’s government published jobs report.  It’s a safe bet that it will be soft.
 
This number was running around 200k (on average) prior to covid.  Wall Street consensus for March is around 250k.  This, and the trend of the six-month rolling average, is all in-line with the data points mentioned above (i.e. a weaker employment situation).
 
If we needed anything else to confirm to the Fed, that they should avoid another mistake with interest rates, this (a soft jobs report) should do the trick.
 
With that, a soft jobs report should be good for stocks. 
 
But, given that influence on the rate outlook, it should be bad for an already declining and vulnerable dollar.     
 
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