Strong US Dollar Hurts Jobs as Weakening Euro Boosts Manufacturing (Part 1 of 2)
Rising US dollar and falling oil prices affect the March jobs report in the US
The US dollar (UUP) has been strengthening, hampering the US economy’s (SPY)(IVV) export competitiveness as US goods become relatively expensive in foreign markets. Further, falling oil prices (USO) have affected energy (XLE) firms’ margins, leading to investment cuts and even layoffs in the sector. Declining export competitiveness coupled with energy sector woes has weighed down the US private payroll report for March.
189,000 jobs added in March: ADP National Employment Report
According to the latest ADP employment report, released on March 1, non-farm private payroll increased by 189,000 jobs in March against median expectations of 225,000. On the higher side, consensus expectations were tied to a 265,000 gain in jobs, as declining oil prices have boosted consumer and business spending.
However, the March reading fell short of the median estimate by 36,000 jobs. We last saw figures below the 200,000 jobs level in January 2014. The private sector payroll report has certainly lowered expectations from Friday’s BLS (Bureau of Labor Statistics) employment situation report.
Services are strong, manufacturing and trade are weak in job growth
On an industry level, professional and business services led the job gains, with 40,000—a 20% rise in jobs over the month since February. Telecom services companies gained on the news. Windstream Holdings (WIN) was up 5%, while Frontier Communications (FTR) was up 3.40% at the April 1 close.
Trade, transportation, and utilities added another 25,000 jobs. However, jobs in this sector grew at 0.09%, the lowest rate for the sector in almost two years. Trade in the US has been affected by the rising US dollar. Diversified utilities firm NRG Energy (NRG) lost about 6.31% on the news.
The construction sector added about 17,000 jobs, a 0.27% gain since February and the lowest rate in the past 11 months. The financial sector, which added 16,000 jobs in March, saw a good 0.20% growth compared to the previous months.
The manufacturing sector failed to add any jobs in March. On the other hand, the sector lost about 1,000 jobs (from 12,284,000 to 12,283,000), marking a decline of 0.1% over February’s job figure for the sector.
While investor sentiments in the US were dampened by the weak jobs report, Eurozone investors rejoiced as a strong manufacturing report reaped gains for European equities.
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