Non-farm payrolls solid but beware of immigration and China tariffs – CIBC

The US posted a solid jobs report today, particularly given some of the recent fears about the economy. It added 151K jobs compared to 160K expected.

“Trade policy uncertainty didn’t appear to have an obvious impact on the American job market in February,” wrote economists at CIBC after the data.

They expect some deterioration in the months ahead as 75K federal workers were let go while trade-exposed businesses hold back on hiring. On the upside, they think that poor winter weather may have held back some hiring and economic activity; that should reverse in the months ahead.

They note layoffs in leisure and hospitality:

Shifts in immigration policy could be part of the reasons why, particularly given the ability of leisure and hospitality to
absorb new immigrants. Border crossings have come down and all indications are the Mexican authorities are
aggressively cracking down to avoid the tariffs

They also suggested that could be why participation fell by 0.2 pp and worry that weak population growth will put upwards pressure on wages.

Under the hood there are signs that wage growth is heating up in different parts of the
economy such as leisure and hospitality, wholesale trade, and non-durable goods manufacturing. While demand is
certainly part of this story, a smaller supply of new workers could also be growing part of that same story.

In general, they don’t see any major cracks but expect the months ahead to be complicated.

The
underlying health of the US economy is still ok, but the uncertainty from whipsawing policy we’ve seen this week is
going to weigh start to show up more gradually in the data, and the higher tariffs on China — which everyone seems to
have forgotten — will also start to push prices higher. Tough times ahead for the Fed but they will be patient and data-
dependent.

Next week we get US data on JOLTS, CPI and consumer sentiment.

This article was written by Adam Button at www.forexlive.com.