Highlights for This Week Include:

Labor market indicators, while showing signs of easing, remain consistent with a healthy labor market. A healthy labor market underpins a healthy consumer which is critical for economic growth and ultimately corporate profits and stock market performance. Consequently, we follow labor market indicators closely.

We remain constructive on stocks where major market indexes continue to make new highs. Most economic sectors are participating in the bull market while international stocks are showing positive developments. We continue to favor cyclicals, led by technology-related industries.

The Employment Report, JOLTS Report, and Initial Jobless Claims Show Healthy but Easing Labor Market

The establishment survey of the February employment report showed nonfarm payrolls expanded by a betterthan-expected 275,000, with the average workweek ticking up to 34.3 hours. Wage growth slowed to just 0.1% m/m or 4.3% y/y, which should help keep inflation on a downward trajectory. Aggregate payrolls (which combine payrolls, hours, and earnings—an important metric for consumer spending power) picked up to 5.3% y/y in February versus 4.8% y/y in January. Strong job growth with easing wage inflation is a favorable combination for the economy, financial markets, and future Federal Reserve interest rate policy.

However, the household survey signaled some weakness with the unemployment rate rising to 3.9% from 3.7% due to a combination of job losers and more job seekers. This puts the unemployment rate at its highest level since January 2022 and suggests some easing in labor market tightness. The conflicting signals between the establishment survey and the household survey suggest uncertainty about the economic outlook.

The JOLTS report is also consistent with a healthy but easing labor market. It showed January job openings edged down to 8.863 million. This is down substantially from its cyclical peak of 12.182 million in March 2022 but continues to exceed the number of unemployed by a wide margin. The ratio of job openings to unemployed workers actually ticked up slightly to 1.45 from 1.42 in the prior month. It continues to reflect tight labor market conditions.

Initial claims for unemployment insurance, a timely and accurate economic indicator, remain range-bound at a low level and have averaged 218,000 per week over the past two years. This is in line with the pre-pandemic level and low by historical norms, indicating robust labor demand.

Stock Market Signals Remain Constructive

Large-cap indexes (S&P 500 and Nasdaq 100) remain bullish, hitting new all-time highs, while mid- and small-cap indexes are showing positive developments. While mega-cap technology continues to show leadership, most other economic sectors are participating in the bull market. Major non-U.S. equity indexes continue to show positive technical developments. A weaker U.S. dollar and lower Treasury yields are also bullish signals.