Private Client Group

May 13th, 2024

April Jobs Report, E-Commerce And Brick-And-Mortar, China Exports Surge

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In today’s Steady Investor, we are taking a deeper dive into key market factors that we believe investors should keep an eye on, such as:

• April’s job report
• The rise in e-commerce and bricks and mortar stores
• The surge in China’s exports

Why the April Jobs Report was Good for Interest Rates – Last week, the U.S. Labor Department reported that the economy added 175,000 new jobs in April, which was well below expectations for 240,000 jobs and also marked a steep decline from March’s 300,000 payroll number. For those rooting for strong and accelerating economic growth, this jobs report came as a disappointment. It showed a loosening in the labor market, and the unemployment rate ticked higher from 3.8% in March to 3.9% in April. For the Federal Reserve and those rooting for interest rate cuts, however, this jobs report factored as a step in the right direction. For one, weaker-than-expected jobs growth allays fears that the economy could be overheating. But second, a looser jobs market means there may ultimately be less pressure on wages, which can be a key ingredient in keeping inflation sticky. For now, the April jobs report adds a bit of hope to the possibility of a rate cut this summer versus this fall, but traders in interest-rate futures still think the likelihood is below 50%. Expectations for the Fed’s first rate cut to come in September rose, however, from 60% before the jobs report to 70% after. Equity and bond markets also seemed to embrace this labor market weakness – stocks rose over 1% on the day of the release, while the yield on the 10-year U.S. Treasury bond fell from 4.569% to 4.498%.1

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The Rise of E-Commerce Was Supposed to End Bricks and Mortar Stores. It Hasn’t, Why? – Make no mistake—the rise of e-commerce has reshaped the retail landscape, especially in the mid-2010s when e-commerce’s share of total retail sales ascended quickly. Hundreds of retailers were forced to declare bankruptcy, and shopping malls around the country shut their doors. E-commerce’s share of total sales has continued to grow since, rising from 6% in 2014 to 15.4% last year.3

E-commerce sales as a percent of total retail sales

Source: Federal Reserve Bank of St. Louis4

But what many predicted would be a bricks and mortar apocalypse has not materialized, and may even be moving in the opposite direction today. Retailers have made adjustments, and are increasingly integrating their physical stores with the online shopping experience. For instance, nearly 42% of e-commerce sales in 2023 involved physical stores, as shoppers buy online to pick up in stores and as stores use existing locations to fulfill orders. All told, retailers are on track to open more stores this year than they will close, for the third consecutive year.

China’s Exports Have Been Surging in 2024. That Has Many Countries Concerned – Worries mounted last year as China’s property market showed major signs of distress, threatening to send the world’s second-largest economy into a period of below-average growth. A surge in Q1 2024 export volumes has dispelled these fears, but is also resulting in a fresh set of concerns—that rising export volumes are a sequel to the “China shock” that pummeled the global manufacturing sector over two decades. Policymakers in the U.S., Europe, and elsewhere are concerned that the Chinese government is pouring money into China’s vast manufacturing sector, thereby flooding the global economy with cheap goods that Chinese consumers don’t want. Export volumes have surged, and were 1.5% higher in Q1 2024 than they were in the same quarter last year. A chorus of overseas policymakers are warning that China is now too big to significantly ramp up its manufacturing output, and should be focused on spurring domestic demand versus growing export volumes.5

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Disclosure

1 Wall Street Journal. May 3, 2024. https://www.wsj.com/economy/jobs/jobs-report-april-unemployment-a8a1ac1a?mod=djemRTE_h

2 Zacks Investment Management reserves the right to amend the terms or rescind the free How the Looking to Retire Soon? Here are 4 Things to Consider First offer at any time and for any reason at its discretion.

3 Wall Street Journal. May 6, 2024. https://www.wsj.com/business/retail/online-shopping-brick-mortar-stores-d7232016?mod=hp_lead_pos6&mod=djemRTE_h

4 Fred Economic Data. February 20, 2024. https://fred.stlouisfed.org/series/ECOMPCTSA#

5 Wall Street Journal. May 5, 2024. https://www.wsj.com/world/china/china-shock-2-0-sparks-global-backlash-against-flood-of-cheap-goods-d394238b?mod=article_inline

6 Zacks Investment Management reserves the right to amend the terms or rescind the free How the Looking to Retire Soon? Here are 4 Things to Consider First offer at any time and for any reason at its discretion.

DISCLOSURE

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties. Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable.

Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

It is not possible to invest directly in an index. Investors pursuing a strategy similar to an index may experience higher or lower returns, which will be reduced by fees and expenses.
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