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Slow but Steady Jobs Growth Expected in April

Friday, May 5, 2017

Today's Spotlight Market

The following are the pre-report estimates for this morning's release of the Non-farm Payrolls and Unemployment data for April:

Non-farm Payrolls: 185,000 estimate vs. 98,000 March

Unemployment Rate: 4.6% estimate vs. 4.5% March

Ave. Hourly Earnings: +0.3% estimate vs. +0.2% March

Average Workweek: 34.4 hours estimate vs. 34.3 hours March

Fundamentals

Traders and analysts are expecting a rebound for U.S. employment in April following a very disappointing 98,000 jobs created in March. Current estimates are for 185,000 jobs being created last month which is more in line with the average monthly job growth the past 12 months. Several economists believe March's jobs figure was an anomaly, caused by weather issues in many parts of the country. While there is some concerns about the slowing economic growth seen in the first quarter of the year, it appears that the Federal Reserve is not overly concerned that this is the start of slowing growth trend and in fact appeared poised resume raising interest rates as possibly as early as the June Federal Open Market Committee Meeting that ends on June 14. The private employment report issued by payrolls processer ADP showed that 177,000 private sector jobs were created in April with the service providing sector accounting for 165,000 on the newly created jobs last month. While the Professional and Business service sector led last month's jobs increase at +72,000, even the widely watched manufacturing sector showed a gain of 11,000 jobs in April. While there can be significant differences in the ADP jobs data when compared to the U.S. Government's data on a month to month basis, the overall trend does tend to correlate over the long term, so it appears that the U.S. economy is continuing to produce jobs in a slow but steady growth pace.

Technical Notes

Looking at the daily continuation chart for Ultra Bond futures, which are futures based on U.S. Treasury Bonds with remaining terms to maturity of no less than 25 years, we notice prices have been trading in an approximate 10-point range since mid-November of last year. The lead month June futures briefly traded above 165-00 in April, in what now appears to be nothing more than a "bull trap" as prices quickly retreated and are now back within the recent trading range. Prices are now currently trading below both the 20 and 200-day moving averages and the 14-day RSI has weakened and is now at a more neutral level of 44.97 as of this writing. Chart support is seen at the March 31 low of 159-24, with resistance seen at the April 18 high of 166-18.

Mike Zarembski, Senior Commodity Analyst