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Market Commentary by Scott J. Brown, Ph.D., Chief Economist
The March Employment Report was good, but not great. Nonfarm payrolls rose by 216,000 – a 159,000 monthly pace in 1Q11 (about 130,000 would correspond to trend growth in the working-age population, and we’d rather see +300,000 per month for a couple of years to make up for the jobs lost during the recession). Private-sector payrolls rose by 230,000, up 1.5% from a year ago. State and local government shed 15,000, following a 46,000 decline in February (-282,000, or -1.4%, from a year ago). The unemployment rate edged down to 8.8%, vs. 8.9% in February and 9.8% in November. The employment-population ratio, a better measure of capacity utilization in the labor market, edged up to 58.5%, trending gradually higher in recent months, but little changed from a year ago. Average hourly earnings and average weekly earnings were flat (up 1.7% year-over-year and 2.3% year-over-year respectively – note that the Consumer Price Index rose 2.1% in the 12 months ending in February).
The other economic data were mixed. However, inflation-adjusted consumer spending (70% of Gross Domestic Product) appears to be tracking at about a 1.5% annual rate in Q1 2011 (vs. +4.0% in Q4 2010). Shipments of nondefense capital goods ex-aircraft, a rough proxy for business fixed investment, are trending down in Q1 2011. Home prices fell further in January, and construction spending declined in the first two months of the quarter. In short, a lot of the key economic data indicate a much slower rate of GDP growth in Q1 2011. So naturally, the stock market is up.
Next week, the economic calendar thins out considerably. Fed Chairman Bernanke speaks on Monday, but his comments are not expected to be market-moving. The European Central Bank is set to hike on Thursday, which could be a mistake given the region’s debt crisis. The current continuing resolution to fund the U.S. federal government expires on Friday. We could see a government shutdown if an agreement isn’t reached.
Consumer Money Rates
Treasury Yield Curve – 4/1/2011
S&P Sector Performance (YTD) – 4/1/2011
Past performance is not a guarantee of future results. There are special risks involved with global investing related to market and currency fluctuations, economic and political instability, and different financial accounting standards. The above material has been obtained from sources considered reliable, but we do not guarantee that it is accurate or complete. There is no assurance that any trends mentioned will continue in the future. While interest on municipal bonds is generally exempt from federal income tax, it may be subject to the federal alternative minimum tax, state or local taxes. In addition, certain municipal bonds (such as Build America Bonds) are issued without a federal tax exemption, which subjects the related interest income to federal income tax. Investing involves risk and investors may incur a profit or a loss.
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Commodities trading is generally considered speculative because of the significant potential for investment loss. Markets for commodities are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising. Specific sector investing can be subject to different and greater risks than more diversified investments.
Tax Equiv Muni yields (TEY) assume a 35% tax rate on triple-A rated, tax-exempt insured revenue bonds.
The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business March 31st, 2011.
Frazier Allen, WMS, CRPS, Financial Advisor with F&M Bank
Web Site: http://www.raymondjames.com/frazierallen
TopicsCapacity Utilization, Consumer Price Index, Economic Data, European Debt, Federal Open Market Committee, Financial Markets, Frazier Allen, Global Equity Markets, Gross Domestic Product, Index of Leading Economic Indicators, Manufacturing Output, Raymond James, Raymond James Investment Services, Scott J. Brown, Seasonal Adjustment, Short-Term Interest Rates, Volatility, Weekly Market Snapshot
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