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March
8
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Week In Review

Employment

Nonfarm payrolls rose by just 20,000 in February, far short of expectations. The unemployment rate fell from 4.0% to 3.8%, while average hourly earnings rose 0.4%. Year-over-year, average hourly earnings are up 3.3%, a cycle high.

Our Take

The February headline payroll increase looks horrendous, but the jobs report was actually positive. There were multiple factors, including a government shutdown and poor weather, which distorted numbers in both January (positively) and February (negatively). Payrolls increased by 165,000 per month when averaging the two months. In addition, unemployment fell back below 4% and wages rose nicely. Indeed, if the wage growth trend continues, there is likely to be increased talk of a resumption of Fed tightening.


ECB

The ECB reduced its forecast for 2019 Eurozone economic growth to 1.1% from 1.7% and announced a series of monetary stimulus measures. Markets initially ticked up on the news of greater stimulus but then declined in response to concerns about growth.

Our Take

The ECB has reacted to slowing economic data much more drastically than the Fed reacted to market data in January. This moves the ECB back into the easing category along with the BOJ and PBOC with the Fed in its “patient” mode. The Fed and ECB have driven a dovish shift in global central bank stances over the past two months. The market response indicates that the global economy may be moving away from the previously perceived “Goldilocks” state into one where concerns about growth outweigh interpretations of how data will influence central banks and fiscal authorities.


Municipals

Moody’s Investors Service upgraded New York City’s general obligation debt rating from Aa2 to Aa1. This marks the first upgrade by Moody’s since 2010. Moody’s cited New York City’s diversified economy along with decreased pension and health care costs as reasons for the upgrade.

Our Take

New York City has experienced strong economic growth, job creation, and improved fiscal health. The recent upgrade comes right before a planned debt sale. The higher debt rating may lead to lower borrowing costs for New York City.