Morning Market Brief: Thursday, April 6, 2023

The U.S. labour market could be losing steam?

A report released yesterday by ADP suggests the U.S. labour market might be losing momentum. While it has been viewed as a pillar of the economic recovery coming out of the pandemic, the U.S. labour market gained fewer than expected jobs from private businesses in March, down from the previous month. A slowdown in the U.S. labour market may affect the Fed’s decisions at upcoming meetings and could weigh on U.S. economic growth.?

• U.S. private businesses added fewer jobs than expected. According to ADP, private businesses in the U.S. added 145,000 jobs in March, well below economists’ expectations.
• March’s result was down from the 261,000 jobs private businesses added in February, suggesting the U.S. labour market may be slowing. A report on Tuesday showed the number of job openings in the U.S. dropped in February.
• The leisure and hospitality industry added the most jobs during March, followed by the trade, transportation and utilities industries. Conversely, the professional and business industry shed jobs during the month.
• The slowdown might keep the U.S. Federal Reserve Board (“Fed”) on a less aggressive interest rate hiking path. The Fed may have less room to raise interest rates with the slowing labour market. The Fed expects rates to climb but will likely take a cautious approach, given uncertain economic conditions.?
• Economic weakness in the U.S. could spill over to Canada. With our economies so closely connected, a pullback in economic conditions in the U.S. could drag down Canada’s economy. If employment slows considerably and weighs on demand in the U.S., it could negatively affect Canadian exports.

If the slowing labour market keeps a lid on interest rate increases by the Fed, it could support U.S., Canadian and global equities. But different regions and sectors might react differently, with economic conditions potentially weakening. Holding a well-diversified portfolio can help withstand periods of uncertainty in financial markets.

At?CIBC Private Wealth, we aim to take a comprehensive approach to managing, building and protecting your wealth. If you'd like to discuss this market and economic update in more detail, please get in touch with your advisor any time.