Friday, May 3rd, 2024
Pre-market futures are happy at this hour. After a rather turbulent week of economic and earnings data taking markets on something of a rollercoaster since Monday, we’re seeing an honest-to-gosh rally in the early trading session. The Dow is up a strong +512 points currently, the Nasdaq is +260 and the S&P 500 +56 points. From a low trough on Wednesday, right now we appear to be headed for a green finish to the week.
Of course, it’s this morning’s Employment Situation report that is driving the bus. A headline of 175K new jobs created for April was down notably from the 240K anticipated, and even farther from the upwardly revised 315K in March (February’s tally was taken down to 236K from 270K in the previous revision, which itself was down. The Unemployment Rate ticked up to 3.9%, but marks the 27th straight month sub-4% (January 2022 was the last time we saw 4% unemployment).
Hourly Wages came down to +0.2% from an expected +0.3%. This is a sign that wage inflation has a looser grip on the economy. The last time we saw a print lower than +0.2% was back in February ’22. Year over year, wage growth reached +3.9% — 20 basis points (bps) lower than the +4.1% the previous month, and the first sub-4% read since June of 2021. All of these lower wage averages are going for the outlook on pending interest rate cuts from the Fed.
Healthcare brought in +56K new jobs last month. Following this is Social Assistance, at +31K, then Transportation/Warehousing at +22K. You’ll notice Leisure & Hospitality and Professional/Business Services not at the top of this list; in fact, both sectors were little changed month over month. Although this is but one month’s set of data, what we’ll be looking for is if these trends of job gains transfers from Travel & Leisure-related work and business consultants to nurses, counselors and teachers.
All in all, these are Goldilocks numbers. The 175K headline still provides job growth beyond filling the holes created by retiring Baby Boomers (roughly 100-120K per month), but wage spirals are not distressing the labor market with higher worker demands, which would thus drive up inflation. To put a finer point on it, what it appears we’re seeing emerge right now is — voila! — a “soft landing.” It will take a larger sample of jobs data to reach this conclusion definitively, but today’s numbers do not refute it.
After today’s open, ISM Services for April are expected to tick up to +52%, clearly above the 50-level which is the inflection point between growth and loss. Again: this resembles a soft-landing scenario, albeit in a snapshot context. We’ll also hear from Fed Presidents Austan Goolsbee (Chicago) and John Williams (New York), and analysts will be listening if there might be a quarter-point rate cut put back into the mid-2024 (July?) calendar.
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Pre-Markets Blossom on Goldilocks Jobs Data
Friday, May 3rd, 2024
Pre-market futures are happy at this hour. After a rather turbulent week of economic and earnings data taking markets on something of a rollercoaster since Monday, we’re seeing an honest-to-gosh rally in the early trading session. The Dow is up a strong +512 points currently, the Nasdaq is +260 and the S&P 500 +56 points. From a low trough on Wednesday, right now we appear to be headed for a green finish to the week.
Of course, it’s this morning’s Employment Situation report that is driving the bus. A headline of 175K new jobs created for April was down notably from the 240K anticipated, and even farther from the upwardly revised 315K in March (February’s tally was taken down to 236K from 270K in the previous revision, which itself was down. The Unemployment Rate ticked up to 3.9%, but marks the 27th straight month sub-4% (January 2022 was the last time we saw 4% unemployment).
Hourly Wages came down to +0.2% from an expected +0.3%. This is a sign that wage inflation has a looser grip on the economy. The last time we saw a print lower than +0.2% was back in February ’22. Year over year, wage growth reached +3.9% — 20 basis points (bps) lower than the +4.1% the previous month, and the first sub-4% read since June of 2021. All of these lower wage averages are going for the outlook on pending interest rate cuts from the Fed.
Healthcare brought in +56K new jobs last month. Following this is Social Assistance, at +31K, then Transportation/Warehousing at +22K. You’ll notice Leisure & Hospitality and Professional/Business Services not at the top of this list; in fact, both sectors were little changed month over month. Although this is but one month’s set of data, what we’ll be looking for is if these trends of job gains transfers from Travel & Leisure-related work and business consultants to nurses, counselors and teachers.
All in all, these are Goldilocks numbers. The 175K headline still provides job growth beyond filling the holes created by retiring Baby Boomers (roughly 100-120K per month), but wage spirals are not distressing the labor market with higher worker demands, which would thus drive up inflation. To put a finer point on it, what it appears we’re seeing emerge right now is — voila! — a “soft landing.” It will take a larger sample of jobs data to reach this conclusion definitively, but today’s numbers do not refute it.
After today’s open, ISM Services for April are expected to tick up to +52%, clearly above the 50-level which is the inflection point between growth and loss. Again: this resembles a soft-landing scenario, albeit in a snapshot context. We’ll also hear from Fed Presidents Austan Goolsbee (Chicago) and John Williams (New York), and analysts will be listening if there might be a quarter-point rate cut put back into the mid-2024 (July?) calendar.
Questions or comments about this article and/or author? Click here>>