HIGHLIGHTS OF THE WEEK – April 13
- Expectations for Fed policy continue to be the dominant theme in financial markets. In the topsy-turvy world of data-dependent monetary policy, the slowdown in job growth in March (to just 126k) was positive for risk sentiment, assuaging fears of an earlier liftoff for interest rates.
- The minutes from the Fed’s March meeting led to some second thoughts on this prognosis. The details were more hawkish than the announcement itself, especially the reference to “several participants” judging a rate hike at the June meeting to be appropriate.
- At the end of the day, the economic data is paramount. Job growth is likely to bounce back from its March outturn, but probably not back to the 260k rate that it has averaged over the past year. This should be enough to stay a cautious Fed from raising rates in June.
- March employment data surprised to the upside with 29K jobs added and the unemployment rate steady at 6.8%. The details paint a weaker story as gains were entirely in part-time work. Both full-time positions and the number of hours worked fell on the month, indicating underlying softness. The TD Labour Market Indicator continues to suggest more weakness than the unemployment number would suggest.
- The Business Outlook Survey continued to indicate weakness in the first quarter, as the outlook for sales, employment, and investment all fell. The declining outlook is largely the result of firms in the energy sector, as other firms benefit from the weak dollar and growing U.S. demand.
- Housing starts rounded out the week. March saw a significant rebound following February’s weather-related slowdown. Despite the rebound, on a trend basis starts continue to decline towards levels implied by demographics.
Manager, Residential Mortgages – Greater Ottawa Area TD Canada Trust
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