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Ahead of Wall Street

Friday, May 3, 2013

The market finally has a good enough reason to go up today in the April non-farm payroll report. Not that it needed any prompt from economic data to go up; stocks have been going up irrespective of economic and earnings data lately.

 

The ‘headline’ April jobs number of 165K came in better than expectations of about 150K and March’s 138K level (revised higher from 88K). The consensus estimate did not fall much following the weaker than expected report from ADP on Wednesday, though many were ‘ready’ for another soft jobs report. Today’s positive jobs report follows weeks of soft economic data, including this week’s weaker than expected ISM and ADP ((ADP - Analyst Report)) surveys. We get the service-sector ISM survey sector a little later today, but the manufacturing ISM survey earlier this week was barely in the positive territory.

The revisions trend was particularly positive, with net positive revisions to March and February adding 114K to the total. March’s originally reported 88K tally was revised higher to 138K and February was raised to 332K from 268K. Average weekly hours for the private sector ticked down by 0.2 hours to 34.4, while average hourly earnings went up by 4 cents $23.87. The labor force participation rate remained unchanged from the March level at 63.3%, but down from 63.6% in January.

Private sector jobs totaled 176K in April, up from 154K in March, but significantly below February’s 319K tally. The private sector gains were concentrated in professional and business services, food services, retail, and healthcare. Professional and business services added 73K jobs in the month, bringing the industry’s 12-month tally to 587K (Temporary jobs were up +31K in April). Contrary to fears, Retail added 29K jobs in April, which should help ease concerns that the payroll tax changes were a big drag for the sector. Construction and manufacturing didn’t add any jobs during the month.  

This is a good report and should help ease concerns about the economy a bit. And it’s a market-friendly report in the sense that it doesn’t affect expectations about the Fed. Monthly job gains in the April vicinity are not strong enough to prompt the Fed to scale back its bond purchase program. The market’s upbeat response to the recent spate of soft economic reports that has pushed stocks into record territory is based on the assurance that the Fed will continue its cheap money policy. Today’s jobs report wouldn’t change that view.

Sheraz Mian

Director of Research

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