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3 Key Takeaways from the Jobs Report 

Kristina Hooper 

 

4/4/2014 

US Investment Strategist Kristina Hooper breaks down the March employment report, including what it means for monetary policy, markets and investors.
What Happened
March non-farm payrolls grew by 192,000, coming close to consensus expectations of 200,000; unemployment remained static at 6.7% as expected.
This indicates continuing but slow and uneven improvement in the labor market.
As Chair Yellen mentioned earlier this week, the Fed is maintaining its "extraordinary commitment" to supporting the economy, and this jobs report should not change that.
Key Takeaways
1
Revisions to January and February non-farm payrolls were positive and significant. The monthly average for the first three months of the year now approximates the 12-month trend. The jobs total suggests the economy continues to expand at a moderate pace. Whether, and to what extent, the Bureau of Labor Statistics adjusted its seasonal factors to account for a difficult winter is unclear, but it may have played into data revisions.
2
The number and percentage of long-term unemployed decreased from 37% of total unemployed to 35.8%, which is positive—although some decrease could be due to those unemployed who are no longer on benefits.
3
All of the jobs gains came from the private sector while the government actually lost jobs. Private-sector payroll growth should be viewed as a positive, while a reduction in government jobs could also be viewed positively as it may help reduce government expenses.
What It Means for Investors
Investors should understand that this jobs report is unlikely to alter the course of monetary policy, which remains highly accommodative. We still remain in an environment of financial repression, which has reshaped the investing landscape. Investors need to ensure they are not overexposed to asset classes that have become less attractive from a risk/reward perspective—namely cash and fixed income. Investors need to move out further on the risk spectrum to ensure they have adequate exposure to asset classes such as high yield bonds, convertible bonds and stocks in order to meet long-term goals.


The material contains the current opinions of the author, which are subject to change without notice. Statements concerning financial market trends are based on current market conditions, which will fluctuate. References to specific securities and issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Forecasts and estimates have certain inherent limitations, and are not intended to be relied upon as advice or interpreted as a recommendation.

 
A Word About Risk: Investing involves risk and you can lose money. Equities have tended to be volatile and, unlike bonds, do not offer a fixed rate of return. Dividend-paying stocks are not guaranteed to continue to pay dividends. High-yield or “junk” bonds have lower credit ratings and involve a greater risk to principal. Convertible securities involve the added risk that securities must be converted before it is optimal. Below investment grade convertible and fixed-income securities involve a greater risk to principal than investment grade securities. US government bonds and Treasury bills are guaranteed by the US government and, if held to maturity, offer a fixed rate of return and fixed principal value. Bond prices will normally decline as interest rates rise.

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Personal income, not job growth, may have drawn the ire of investors as stocks sold off on Friday. But look for the market to rebound on continued economic progress and soothing remarks from the Fed, writes Kristina Hooper.
Market Insights 
AGI-2014-04-04-9286 

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