Weekly Economic Update: April 8th, 2019
• Yields rebounded somewhat during the week with two year Treasury notes increasing seven basis points to 2.33 from 2.26. The increase in yields across the curve was the result of firming economic conditions and a positive employment report. The curve is now back to a positive relationship between the three-month bill and the ten-year treasury note. The move to a yield pickup reverses the short-lived inversion between the two securities. An inverted curve is often a precursor to weaker economic conditions and a possible recession. The move back into positive territory could help alleviate near term economic concerns.
• The equity market rallied last week with the Dow Jones climbing 496 points. Stock investors are comfortable with a Fed that is on hold while the chance for a trade deal with China seems to be improving.
• The March employment report was announced on Friday and beat expectations with a growth of 196,000 in non-farm payrolls. The unemployment rate held at 3.8% while earnings climbed 3.2% in March. Weekly claims for unemployment benefits registered 202,000 which is close to a fifty year low supporting the argument that economic conditions have not substantially impacted employment. Growth has cooled but doesn’t seem to be accelerating to the downside. The employment report will help affirm the Fed’s decision to stay its interest rate course of no changes this year.