Jobs report may give Fed pause

April 05 23:08 2015

For investors, the March jobs report means that the Federal Reserve’s first interest-rate hike could be slowly receding in the distance. The Bureau of Labor Statistics reported that the economy created 126,000 new jobs, the lowest since December 2013 and far below analysts’ estimates of 248,000 new jobs. The unemployment rate remained at 5.5%.635636454750031206-AP-US-TIPPED-WAGE-71110788

“It’s definitely a disappointing report,” says Jeffrey MacDonald, Director of Fixed Income Strategy at Fiduciary Trust Company International. “It really was under any estimate you could find.” Add the soaring dollar to the disappointing jobs report, and you have a Fed that’s unlikely to raise interest rates at its June meeting. A strong dollar hurts U.S. manufacturing, because it makes exports more expensive.”The evidence is very clear that the U.S. dollar is having a stronger than realized negative impact on the U.S. economy,” says Russell Price, senior economist at Ameriprise Financial.

The Fed has noted that its actions will be data dependent, meaning that they will wait for fairly conclusive evidence of a strong jobs market before raising short-term interest rates. “The rate hike is probably a September or later event,” MacDonald says. For savers, that means yet another few months of earning nothing on their bank CDs and money market funds, as opposed to a little bit. The bond market, which is only happy when it rains, rallied in the report, pushing bond prices up and yields down. The bellwether 10-year Treasury note yield fell to 1.82% on the news.

The stock market is closed for the Good Friday holiday, but even at current levels, stocks remain more attractive than bonds and money funds. One bright spot: Average hourly earnings gained 2.1% the past 12 months, MacDonald says, vs. a 2% year-over-year gain in February.