Employers Add Fewest Workers Since 2013

In March, employers added the fewest workers since December of 2013. Non-farm payrolls rose by 126,000 in March, lower than even the weakest estimate and well below the average estimate of 245,000. The unemployment rate remained unchanged at 5.5%. The report details showed slower hiring among most sectors and a dip in the workforce participation rate. While these numbers were certainly disappointing, it is tough to put too much stock into one month of data, especially as these numbers are subject to revision (and often do get revised). A bright spot in the report was that average hourly earnings rose by 0.3% for the month and 2.1% year-over-year.

U.S. Factories Slow For 5th Straight Month:

The ISM Manufacturing Index, a measure of overall factory sector trends, fell for the first straight month to a measure of 51.5 for March. The average economist estimate was for a 52.5 reading. For reference, a reading above 50 indicates expansion. There were several factors that led to this lower reading last month. The West Coast port strike impacted the import/export data, as we detailed a few weeks back. A stronger dollar weighed down this reading, as exports are beginning to slow due to a higher cost of U.S. goods. A tough winter also may have impacted the reading. As most of the factors that weighed down the reading were temporary, a rebound could occur in the coming months.

Investors Await Earnings Announcements:

Next week brings the unofficial start to earnings season when Alcoa (AA) reports its 1st quarter earnings on Wednesday. The markets seem to be painting a gloomy picture for earnings as the U.S. dollar continued to strengthen, while oil prices remain lower. A strong dollar is expected to hurt multinational companies, as their revenues acquired outside the U.S. will be hurt by the weakening local currencies. Lower oil prices will obviously affect energy companies, though it will be interesting to see how they have helped the consumer and industrial sectors. All told, the average estimate for the first quarter is that earnings for companies in the S&P 500 are expected to fall 4.8% from the first quarter of last year, according to FactSet. Falling earnings are not necessarily a trigger to signal markets are going lower, especially when the markets expect it. It is when earnings fall unexpectedly that we tend to see the declines in the market. Besides Alcoa, only a handful of companies will report earnings next week. Still, it will be important to gauge the market sentiment, as well as corporate guidance for the upcoming quarter.