A Reuters Open Interest newsletter |
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World markets reeled on Thursday, with stocks mostly lower and U.S. oil soaring 11% after President Donald Trump indicated there will be no let up in the war on Iran, meaning the Strait of Hormuz won't be opening up soon, as traders had hoped.
In my column today I look at the U.S. labor market ahead of Friday's nonfarm payrolls. From the outside, it looks stable, with labor supply and demand roughly balanced. But job growth has ground to a halt and that isn't good, especially in light of the economic pressures triggered by the Iran war.
I’d love to hear from you, so please reach out to me with comments at jamie.mcgeever@thomsonreuters.com. You can also follow me at @ReutersJamie and @reutersjamie.bsky.social.
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STOCKS: Asia slumps, Europe ex-UK dips, Japan -2%, South Korea -5%, FTSE 100 +0.7%, Wall Street narrowly mixed.
- SECTORS/SHARES: Six S&P 500 sectors rise, five fall. Real estate +1.5%, tech +0.7%; consumer discretionaries -1.5%. Intel +5%, Tesla -5%.
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FX: Dollar rebounds broadly. Indian rupee surges 2% for best day since 2013 after RBI curbs FX speculation.
- BONDS: U.S. Treasuries rise, yields -2 bps at longer end, .
- COMMODITIES/METALS: Oil soars. Brent +7% to $108/bbl, WTI +11% to $111. WTI has biggest dollar gain in five years. Gold -2%.
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* Seeking a Strait answer
If there's one thing driving financial market sentiment and pricing more than anything else, it is the ebb and flow of expectation around when the Strait of Hormuz will re-open. Thursday's trading was a microcosm of that.
U.S. President Trump strongly indicated Wednesday there is no imminent ceasefire, deal, or offramp. Stocks slumped, oil soared. Some of these moves were reversed Thursday on news Iran and Oman are monitor traffic in the Strait, fueling hopes of a re-opening. Meanwhile, the war is about to enter its sixth week. |
* The fragile 'no hire' US jobs market
The March U.S. employment report is released on Friday, and is expected to show net 60,000 jobs added and an unchanged unemployment rate of 4.4%. On the face of it, that doesn't look too bad, but below the surface there's cause for concern.
Job growth is stagnant, with the six-month average payrolls close to zero. The breakeven payrolls level is close to zero, with labor supply cratering too. This is not a healthy labor market, and the inflationary and economic pressures ignited by the Iran war could expose its frailties. * Blue Owl blues
Turmoil in private credit markets deepened on Thursday after Blue Owl said it is limiting withdrawals from two funds after record redemption requests, renewing fears over valuations, lending standards, and potential systemic risks in the opaque sector.
This is the latest of many cases of investors wanting to get their money out of private credit funds, but having these withdrwals capped. Limiting redemptions only intensifies these concerns though, and is sure to draw even closer attention of regulators. |
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Iran war exposes frailties of 'no-hire' US economy |
U.S. job growth is slowing to a virtual standstill. If this were tolerable to policymakers or acceptable to investors before the Iran war, it shouldn't be now.
The labor market has been steadily deteriorating for some time, but this has been masked by the headline unemployment rate which has drifted higher, but only gradually. At 4.4%, it remains low by historical standards. |
Jobs growth is evaporating. The six-month average monthly payroll growth is close to zero, and was even negative a few months ago. For the largest economy in the world, a $30 trillion juggernaut with a labor force of around 170 million, that isn't sustainable or desirable. |
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