Week of April 10, 2023

The U.S. markets are coming off a choppy week as investors digested signs of a weakening labor market.  Although this is the result the Federal Reserve (Fed) has been trying to achieve, the March jobs report released last Friday showed a resilient economy and moderate inflation.  Nonfarm payrolls grew by 236,000 for the month, roughly in line with the Dow Jones estimate of 238,000, the Labor Department reported.  The unemployment rate fell to 3.5% with analysts’ expectations that the rate would hold from the previous month at 3.6%.

The data is consistent with expectations of a slow-moving recession unfolding in the U.S. – one that doesn’t point to the immediate resolution of inflation concerns, according to Jason Pride, chief investment officer of Private Wealth of Glenmede.  “As such, the odds of another quarter-point rate hike in May should go higher as the data does not appear to justify a Fed pause,” he added.  Currently, analysts are putting an 80% probability on the Fed raising rates by ¼% (25 basis points) during their next meeting scheduled for early May.

Investors are in for a busy week of economic data, including the latest consumer price index (CPI) and producer price index (PPI) – due out this Wednesday and Thursday, respectively – which will be key in determining if or when the Fed will pause or put an end to its rate hike campaign.