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March
10
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Week In Review

Employment

The BLS released employment data for February. The household survey showed unemployment dropping 0.1% to 4.7% even as participation grew from 62.9% to 63.0%. The establishment survey reported a February increase of 235,000 jobs, and this brings the 3-month average above 200,000 jobs. Hourly wages rose 0.23% month-over- month and 2.8% year-over-year.

Our Take

This was a strong employment report, and it firms up the recent trends in employment, wage gains, and labor force participation. This report provides validation to the Fed’s recent indications that the economy is reaching a point where monetary tightening will be appropriate. With this report, an increase in the Fed Funds rate at next week’s meeting becomes even more likely.


Oil

U.S. crude stockpiles continued to reach record highs, as increased domestic production offset the impact of increasing crude exports. As a result, the benchmark price of WTI crude fell below $50/barrel for the first time since last November’s OPEC-Russia output reduction deal. OPEC officials have made statements about maintaining market share, but so far, OPEC and Russia seem to be sticking to their agreed-to output cuts.

Our Take

The significant uptick in U.S. shale production and planned investment following the OPEC- Russia output reduction deal has been much larger than expected, and it indicates that U.S. onshore production is now the swing producer at around $50/barrel. The key implication of this development is that it will be difficult to maintain significantly higher crude prices for any period of time. This will have an important impact on the budgets of several large oil-exporting nations that rely heavily on oil revenues to fund government priorities.


Municipals

The Airports Council International – North America released a study this week that estimates that airports in the United States could need $100 billion in capital improvements over the next five years. The report indicated that airports may only be able to fund half of what is needed. Improvements are needed due to higher passenger and cargo volume and aging infrastructure.

Our Take

During his campaign and again during his address to Congress last month, President Trump promised $1 trillion in infrastructure spending. Since Trump took office and has reiterated his infrastructure plan, different groups and organizations are all vying for funding. Funding may be difficult to come by as available funds fall far short of needed funds.