The document provides an economic snapshot highlighting a tightening labor market, with initial jobless claims increasing to 276,000 and the unemployment rate rising slightly to 5.0%. Despite challenges, including a drop in consumer spending and pressures from a strong dollar and lower energy prices, there are indications of resilience in core consumption prices and employment, suggesting potential for economic growth later in the year. The Federal Reserve maintained stable interest rates but cautioned that easy monetary policy may lead to sharper tightening in the future.

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Economic Snapshot April 4, 2016
MARKET COMMENTARY
The labor market continues to tighten as the economy grows. The Labor Department stated initial jobless
claims increased by 11,000 to 276,000 in the week ending March 26, 2016. The four-week moving
average was 263,250. The private sector added 200,000 jobs in March. 214,000 jobs were added to the
labor market in March, but revisions to the prior two months were blended, leading to a revision of -
1,000 net jobs. The unemployment rate edged up from 4.9% to 5.0% as the number of people in the labor
force rose more than the number of people employed, showing that people have started to re-enter the
labor force as they gain more confidence in their ability to find employment.
Core consumption prices increased to 2.3% y/y growth in February, the strongest rise of the expansion.
Headline consumer prices (which include energy components and volatile food) dropped -0.2% this
month. Most of this decline was caused by the 6.0% drop in energy prices. The shelter, apparel and
health care components displayed firm price appreciation in the month, causing the core measure to rise.
Other inflation data continued to grow in February with import prices declining less than previously
forecasted, providing more evidence the consumption deflator is inching towards the Fed’s inflation
target of 2%.
The 10-year U.S. Treasury note yield decreased -0.12% to 1.79% for the week ending March 24, 2016.
The Fed held short-term interest rates stable in the rage of 0.25%-0.50% in March. The Fed also lowered
its projections for increasing the federal funds rate in 2016 from four to two, and Fed Chair Yellen has
restated that they will proceed with caution. However, the combination of a low unemployment rate and
the highest core CPI reading of the expansion, it suggests that the economic climate in the U.S. is tough
enough to withstand a rate increase. J.P. Morgan Funds stated “We caution that this very easy monetary
policy increases the odds that they may eventually need to tighten more sharply than the market
expects.”
In its final estimate of 4Q 2015 GDP, the BEA displayed the U.S. economy growing at a seasonally
adjusted annual rate (saar) of 1.4%, an increased modification from the earlier statement of 1.0% growth.
Consumption was the main growth driver in 4Q 2015, but consumer spending thus far has been softer than
expected this year, specifically after a big downward revision to the January numbers last week. This
suggests that the risks to GDP in 1Q 2016 might be to the downside. The Commerce Department posted
construction spending declined 0.5% and consumer spending increased 0.1% in February. S&P/Case-
Shiller reported average home prices increased 5.4% in January. ISM noted manufacturing expanded in
March.
According to the S&P Dow Jones Indices, as of March 23, 2016, of the 498 S&P 500 Index companies
reporting 4Q earnings, 68.7% - beat analysts’ estimates. With 98% of the S&P 500 market cap having
reported earnings, it is clear that companies continued to suffer due to a stronger U.S. dollar and lower
energy prices in 4Q 2016. Overall earnings dropped 13.8% y/y, and the trend of companies beating on
the bottom line missed on the top line continued. With the combination of persistent pain coming from a
strong dollar and low energy prices, 1Q 2016 could also be a struggle for profits, but analysts expect a
rebound in the latter half of the year.
Jobs
Inflation
Rates
Growth
Profits
Denotes updated data
This weekly update
provides a snapshot of
changes in the economy
and markets and their
implications for investors.

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MARKET COMMENTARY
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