Mediocre conditions will keep the Fed sidelined
The April employment report provides further evidence that the economy is showing clear signs of slowing and supports our view for no rate hikes this year.
The monthly print was in line with our view that we would see a slowing in hiring on the back of the recent drop in economic activity.
Just 160,000 jobs were added in the month of April with a net 20k downward revision to the previous two months. The monthly print was a hefty 40k miss from the Bloomberg consensus and more in line with our view of 175,000 -- with highlighted downside risks.
We expect the Fed to view this report as mildly negative. The trend in employment is slowing (last three prints were: 233k, 208k, 160k) and the FOMC will likely take note. Leading off the FOMC statement with the impressive gains in the labor market will be a tougher task.
We continue to think that the FOMC will keep rates on hold throughout 2016 and 2017 as they wait for further evidence that the economy is accelerating and that global financial conditions remain benign.
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