Clarksville Weekly Market Snapshot from Frazier Allen for the week of May 10th, 2015

Clarksville, TN – The April employment report was in line with expectations. Details suggested: 1) a rebound from March weather effects; 2) some moderation in the underlying pace of job growth (relative to the very brisk pace of 4Q14); and 3) a very gradual pace of reduction in labor market slack.

Nonfarm payrolls rose by 223,000, while the weather-restrained March increase was revised down to +85,000 (from +126,000) – leaving an average monthly gain of 154,000 for March and April. The unemployment rate was essentially unchanged at 5.4%. Average hourly earnings rose 0.1%, up 2.2% year-over-year (still lackluster).

The trade deficit widened more than expected in March, implying (all else equal) a downward revision to the estimate of 1Q15 GDP growth (a 0.2% annual rate in the advance estimate, now seen as negative).

The financial press made far too much of comments from Janet Yellen. Asked about the consequences of an extended period of very low interest rates, the Fed chair noted that “equity market valuations at this point are generally quite high.” A number of market metrics suggest that’s true. Her comments may have worsened a stock market sell-off, but they didn’t cause it.

The more pressing issue was a rise in long-term interest rates. The 10-year German bund yield had risen more than 50 basis points in two weeks, spiked sharply higher on Thursday, but then reversed, suggesting that the rise in global bond yields may have run its course (that set the markets up nicely before the as-expected April employment data).

In addition, the U.K. election, which had appeared up for grabs, ended with a surprisingly decisive victory for the Conservative Party (helping to ease global market anxieties).

Next week, Greece may be a worry early on. Otherwise, the focus is expected to be on the retail sales figures (Wednesday). Unit auto sales were reported to have declined last month. Core retail sales are likely to have risen moderately.

Important Disclosures

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The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business May 7th, 2015.

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