• Category: News

Investor Reaction Toward U.S. Job Data is Set To be Imbalanced

Although stock exchanges around the world will remain closed on April 3 in celebration of Good Friday, the U.S. government will still release the much anticipated job market data.

Investor Reaction Toward U.S. Job Data is Set To be Imbalanced

It is not yet clear how investors will react to the report and the full spectrum of reactions is set to be demonstrated on Monday 6 when the stock exchanges resume.

According to Art Hogan, chief market strategist at Wunderlich Securities, the best approach for short-term stock investors is to not trade at all in anticipation of the data.

He asserted, “Sometimes it is just better not to make a trade at all.”

Other market observers and economists have pointed out to the difficulty traders may have in making confident bets prior to the report’s release. 

Hogan added, “There is going to be plenty of opportunity to get a reaction and the reaction will probably be truer on Monday when the markets resume.” This is certainly a much better approach for traders instead of taking a position ahead of the report because currently, without the data, it simply is not possible for traders to react in real time. 

The managing director of trading and derivatives at the Schwab Center for Financial Research, Randy Frederick, said for sure, the markets are currently volatile for short-term traders.

Frederick added, “In the past quarter, the markets were unpredictable, one day bringing good news and the next day the good news was viewed as bad news given that there was anticipation of Fed rate hikes.”

According to economists’ forecast, payroll has likely increased by 245,000 after it climbed by 295,000 in February. For 12 consecutive months, 200,000 jobs have been added into the U.S. economy each month. The question in investors’ minds is whether the data will be any different in March.

Data from ADP, which usually serves as a benchmark for government’s payroll reports shows that the 200,000 jobs per month trend may not be seen in the March report.

However, Chris Rupkey, the senior financial economist at Bank of Tokyo-Mitsubishi UJF said, “Let’s wait for the real report on Friday, the real numbers from the Bureau of Labour Statistics. Friday could come with big, big news.”

Rupkey forecasts that up to 230K jobs were added into the U.S. economy in March alone.

However, few economists are as optimistic especially with regard to wage breakouts. They anticipate a year on year increase of 2 percent in average hourly wages.

Even then, there is a lot of anticipation that companies will start to increase wages as the U.S. job market shows impressive progress. Companies at the lower end of the wage spectrum are set to boost wages as has been evidenced by Wal-Mart and McDonald’s move to increase worker pay.

Although jobless rates were much lower at 5.5% in March, economists are more concerned about factors such as underemployment and the levels of economic participation to assess the strength of the economy. This data will be important as the Federal Reserve gears up to raise interest rates.

Market Impact

Ahead of the report, there has been apprehension about liquidity in the treasury market. It is worthwhile for investors to note that yields could shoot up due to the short trading session this week, combined with liquidity concerns, which could amplify any type of selloff.

 
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