April 8, 2024
Markets were softer even as the labor data stayed strong. The S&P 500 closed at 5,204.34, down 0.95% for the week, while the Dow fell 2.27%, the Nasdaq dropped 0.80%, and the Russell 2000 declined 2.87%. WTI crude rose 4.34% to $86.73, and the 10-year Treasury stood at 4.4%. Higher oil and higher yields made the rate-cut story harder to underwrite.
The March jobs report was hot. Employers added 303,000 jobs, the unemployment rate fell from 3.9% to 3.8%, and the economy posted its 39th consecutive month of job growth. Average hourly earnings rose 4.1% from a year earlier. The strongest categories were private education and health services at 88,000 jobs, government at 71,000, leisure and hospitality at 49,000, and construction at 39,000. Financial activities added only 3,000, while information, manufacturing, and utilities showed no growth.
Immigration may help explain why hiring stayed strong without the same wage pressure investors might normally expect. The CBO estimated population growth at 0.9%, compared with the Census Bureau's 0.5% estimate. If the labor force is larger than assumed, the economy can absorb more jobs before overheating. Jerome Powell has acknowledged that immigration can affect labor-market readings, but it does not remove the need to watch wages and inflation. For recruiting, the useful answer is that the headline was strong, but the labor supply story matters.
Central banks were moving on different timelines. Japan's tankan index for large manufacturers fell from +13 to +11, although large firms still planned 4% capex growth and non-manufacturer sentiment reached its highest level since August 1991. South Korea's CPI rose 3.1% year over year, above the 2% target, and the Bank of Korea held its base rate at 3.50% for a ninth time. Sweden held at 4%, but a May cut was possible if inflation kept easing.
Tesla was a company-specific example of multiple compression. The stock was down 34% for the year after weaker sales, more competition, price cuts in China, and discounted U.S. vehicles. The issue was not only EV demand, but whether Tesla could protect margins while volume growth slowed.
Dollar stores showed why real estate strategy matters. Dollar General planned 800 new stores, while Family Dollar planned to close more than 600 by August. Dollar General's rural footprint carries occupancy costs nearly one-third lower than Family Dollar's, and it has invested more in remodeling. The category still has scale, with Dollar General and Dollar Tree's Family Dollar expected to reach $83.1 billion of combined revenue by 2027, up 26% from 2022.