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PODCAST: March 2019 Labor Market Report Analysis and Commentary


  • Transcript


    Welcome to the Bryn Mawr Trust Wealth Management Podcast, providing commentary on what’s moving the financial markets, financial planning, and other timely business and monetary topics. Please welcome today’s host, Jim Barnes, director of Fixed Income at BMT Wealth Management.

    [JIM BARNES] Hello, my name is Jim Barnes. I’m the director of Fixed Income here at Bryn Mawr Trust. And earlier today, we had received an update on the US labor market for the month of March. So for today’s discussion, I’m going to focus in on today’s labor market report, discuss what it tells us about the US economy, the overall market’s reaction to the report, and exactly what is the BMTC’s investment team’s outlook, given what we’ve seen.

    But first, before I get started, I just want to give you some background information in regards to the current environment that we’re in and just some background as to why the labor market data report from earlier today is so important. So we know that today, when we look at the overall environment, it has been somewhat pessimistic in regards to investors’ overall outlook.

    We know that economic growth has been decelerating. There’ve been a number of data points, both inside of us and, most importantly, outside the US as well, where we’ve seen economic growth statistics in China, Europe, Japan. All come in slightly less than had been expected. And we’ve seen a lot of economic growth forecasts being revised lower for 2019. And it’s interesting because the Fed Chairman Powell had noted as such at the FOMC meeting that was held in mid-March earlier this year.

    With that being said, there has been a high probability placed on a potential interest rate cut before the end of 2019 as the market feels as if the Fed’s going to have to get ahead of this in order to keep economic growth on par. With that being said, it is somewhat interesting when you think about the US economy.

    A month ago, we did receive a soft patch within a labor market report. So with someone– was someone on the negative side, which is why all eyes were on this morning’s report, to see if that employment data was just a one off or possibly that’s a continuous trend to the downside. Now, when it comes at labor market report, very important because it’s going to capture basically the individuals here that make up GDP.

    If you think about overall consumer spending, that’s really one of the primary drivers of the US economy. Consumers make up over 2/3 of all our gross domestic product. So when you have a healthy labor market, that generally ties into strong consumer spending, either because you have more individuals working. Or if you get some wage growth in there, now they have more money at their disposal to, perhaps, increase their overall discretionary spending.

    So when it comes to the labor market, very, very important. So now, just turning to the data this morning, and what exactly did we see? Well, there’s just a number of different statistics that kind of captured the overall labor environment. I want to focus on a few. I’m going to focus in on the unemployment rate. I’m going to focus in on the number of jobs that US companies are adding to the economy. And then I also want to focus on different statistics as it relates to just overall wage growth.

    So on the unemployment front, the unemployment rate came in at 3.8%, the same level where it was last month. And it’s actually– believe it or not, it’s at a close to a 50 year low. The lowest it’s been over the last 50 years or so going as far back as 1969 was 3.7%.

    So we’re right there. From an unemployment standpoint, we have a number of individuals that are out there working. Still some people on the sidelines but a 3.8% is a very healthy number.

    The other thing we always like to look at is how many jobs US companies have added. And for the month of March, we were looking at roughly 196,000 new jobs for the month of March. That’s a good number. That’s a healthy number. When I think back to what we saw the prior month in February, it was probably closer to around 30,000 or so.

    So this was a nice pickup that the market was looking for, that the market was hoping for. Here we are in March, we see that US companies have added close to 200,000 jobs. So it kind of makes that February number seem more as if it’s a one off.

    One of things we always like to do here is we like to see what the overall trend is and maybe average in on a month-to-month basis just so some of those of data points so we can kind of get rid of the noise. With that being said, if I look at just January, February, and March, the average monthly gain is about 180,000. And so that’s a fairly good number. And it’s reflective of a very healthy US economy.

    Now, turning to wage growth, wage growth actually came in a little lower than what had been anticipated. Wages increase 0.1% percent in March. And that translates into, on a year over year basis, about 3.2%.
    So that’s good. You want to have wage growth above 3%. I think that’s positive. Just it shows that, reflects that, individuals have additional income. And as I said before, more income is a positive thing, more opportunity for discretionary spending drives economic growth and so forth.

    However, 3.2% was a little light, lower than what investors had been anticipating. And when I think about, when I take all these numbers together, what is this telling us about the overall US economy, it’s still slightly positive. Still on the positive side because it’s telling us that employers continue to add more and more people to their payrolls. That’s a good thing.

    At the same point, there’s still enough individuals out there on the sidelines where it’s not putting too much pressure to the upside for corporations to increase their wages. That’s an important fact when it comes to just overall corporate margins. And we think about one of the Federal Reserve’s objectives is to monitor inflation and make sure that it’s not heating up, it’s not getting to high.

    Wage inflation is probably– or I should say, wages overall is typically a corporation, one of their higher expenses that they have to deal with. So if that stays somewhat at bay, if you don’t see too much acceleration there, it gives them more coverage and not have to raise prices on goods and services to the extent where it could become too alarming for the Fed.

    So I’d say, overall, it was a good labor market report. The market seems to like it. The equity markets, they’re all on the upside, which was a good thing. And then I look at the fixed income markets, when I look at bond yields, bond yields really didn’t change all that much.

    And it’s interesting because, in fixed income and when I think about yields, what the fixed income investors are looking for, they’re looking for signs of, is there significant inflation pressures building up?

    And as I said before, the rate inflation data came in less than had been expected. So it’s somewhat of a benign report, a little bit on the sluggish side on the inflation side. So you can see why fixed income investors didn’t have to readjust yields by any higher. They were basically at bay, comfortable with the tenure which is trading right now, right around 2 and 1/2%.
    So what is our thoughts on this, the BMT investment outlook, given the new data that we received? It really hasn’t changed all that much. We think that some of the pessimism that has been incorporated in the markets out there has been somewhat overdone. We do see that economic growth is decelerating.

    But we just don’t foresee a recession coming on in the near term. Yes, we do think that growth will be less than 3%. It will be lower. But there’s still enough good things going on within different sectors within the US economy that we think we’ll keep that economic growth north of 2% and keep those recessions behind us for now.

    Of course, though, we’re always looking at the data as it comes in and paying attention to any developments, both here domestically as well as outside the US. My name is Jim Barnes. I’m the director of Fixed Income here at Bryn Mawr Trust. I very much appreciate our time together today and look forward to some future discussions. If you have any questions, please feel free to visit our website at


    [AUDIO CONCLUSION/CLOSE] This has been a production of Bryn Mawr Trust, copyright 2019. Visit us online at The views expressed herein are those of Bryn Mawr Trust as of the day recorded and are subject to change without notice. Guest opinions are their own and may differ from those of Bryn Mawr Trust and its affiliates and subsidiaries. This podcast is for informational purposes only and should not be construed as a recommendation for any product or service. BMT Wealth Management provides products and services through Bryn Mawr Bank Corporation and its various affiliates and subsidiaries, which do not provide legal, tax, or accounting advice. Please consult your legal, tax, or accounting advisors to determine how this information may apply to your own situation. Investments and insurance products are not bank deposits, are not FDIC insured, or not backed by any bank or government guarantee and may lose value. Past performance is no guarantee of future results. Insurance products not available in all states.