This commentary was originally sent to Action Alerts PLUS subscribers on Apr. 1 at 10:06a.m. ET.
The U.S. economy added 215,000 jobs in March, a touch above consensus of 213,000, while unemployment nudged to 5.0% (vs. 4.9% expectations), wages grew 2.3% over the previous year (vs. expectations for 2.2% growth) and the labor participation rate hit 63% (from 62.9% in February).
Meanwhile, revisions showed employers added 1,000 fewer jobs in January and February than previously estimated. In the first quarter of 2016, job gains averaged 209,000 a month.
In our view, the report was solid, but uninspiring, and was not strong enough to change the Fed's rate outlook heading into its April meeting. As long as the Fed remains focused on monitoring international headwinds, we expect U.S. data to have a marginal impact in the absence of extremes.
While the headline unemployment rate ticked higher to 5.0% from an eight-year low of 4.9%, it was a result of more Americans returning to the labor force. A broad measure of unemployment that includes Americans stuck in part-time jobs or too discouraged to look for work rose slightly to 9.8% from 9.7% in February (which had been the lowest reading since 2008).
Retail accounted for the most gains in March, adding 48,000 jobs, followed by strength in construction, health care and restaurants. On the flip side, manufacturing shed 29,000 jobs (24,000 of which were durable goods), machinery lost 7,000, primary metals lost 3,000 and electronics/semiconductors shed 3,000. The labor market has largely remained resilient amidst slowing economic growth and cheap oil prices, yet the continued fall-out in manufacturing reflects how the strong U.S. dollar continues to plague exports.
With the Fed's focus outside of the U.S., we view today's in-line report as relatively inconsequential, near-term. If anything, it leaves Yellen's dovish stance unchanged. With respect to the Action Alerts PLUS portfolio, the lower-for-longer rates and flattening yield curve are negative for our financial names -- Bank of America (BAC:NYSE) and Wells Fargo (WFC:NYSE) -- while strength in retail is a positive for the likes of Costco (COST:Nasdaq), Panera (PNRA:Nasdaq), Starbucks (SBUX:Nasdaq), Target (TGT:NYSE) and Walgreens Boots Alliance (WBA:Nasdaq).