Daily Commentary

MarketMinder’s View: The wordy headline gives you the main data takeaways from Friday’s April US Employment Situation Report, which showed hiring slowed a bit but far exceeded expectations for 135,000. The headline unemployment rate remains historically low, at 4.2%, and—not reported herein—the broadest unemployment rate, the U6 rate, ticked down from 7.9% to 7.8%, the second-straight monthly decline. (Source: US Bureau of Labor Statistics.) That rate includes people working part-time for economic reasons and discouraged workers who haven’t sought a job in the past four weeks, so it is a more complete picture of labor market dynamics. Now then, this article goes on to cast this in light of political takeaways, so please note that MarketMinder favors no politician nor any political party, and the discussions herein just aren’t relevant for markets. It further casts the healthy labor market in light of what it means for inherently unpredictable Fed policy, mistakenly linking jobs to interest rates. The last three years should serve to prove the fallacy of this connection, as spiking rates didn’t send unemployment leaping. But the main thing to understand about this: The healthy state of the labor market tells you exactly nothing about what is to come. This article admits that tacitly by casting all this as pre-Trump tariff data, which they are. But labor market data are always late lagging. Trying to forecast forward-looking markets using them is a fallacious practice.

MarketMinder’s View: Naturally, this article discussing proposed tax legislation dives into partisan politics, so please note MarketMinder favors no politician nor any party, assessing developments solely for potential economic effects. Since the election, we have seen many posit sweeping tax cuts could boost growth—with tariffs possibly filling any gap in receipts. We think this is highly unlikely, for three reasons. One, tax cuts rarely have the stimulative benefits people presume. Two, Congress is narrowly divided, limiting the scope of a bill. Three, most talk is of extending the current code set to expire at yearend, which wouldn’t be stimulus at all. This article dives deep into numbers two and three here, sensibly documenting the scope of ongoing talks. While granting some certainty over tax policy is a benefit of potential legislation—and there are likely marginal positives from restoring “100% expensing”—other things like eliminating taxes on tips are too small to matter economically (if they can even pass Congress, as noted herein). This is a matter we are watching, but we don’t advise getting overly optimistic about huge cuts.

MarketMinder’s View: This roundup of Asian purchasing managers’ indexes (PMIs, surveys tallying the breadth of growth) highlights a largely consistent theme of manufacturing weakness in April across a range of exporters, with Taiwan, Indonesia, Thailand and South Korea all posting sub-50 readings in the month (indicating more firms reported falling activity than growing). Which is all fair enough, but for weeks, every data point showing rising consumption, exports, production or growth has been seen as “frontrunning tariffs,” with the implication a pothole looms. We aren’t saying that explanation is wrong—it may very well be correct. But the ubiquity means it is widely known—and widely known factors get pre-priced very effectively by markets. Hence, the contraction in the PMIs highlighted here might be news in the raw sense the data just came out—but to markets it is ancient history.