The stock market was soaring after a stronger-than-expected jobs report was released Friday morning. Wait, what?!?!
That’s not the way it was supposed to happen. The U.S. economy added 253,000 jobs in April, well above expectations for 185,000, while the unemployment rate fell to 3.4% when it was supposed to rise to 3.6%. What’s more, average hourly earnings rose 0.5%, well above expectations for a 0.3% increase. On the surface, everything was hot, hot, hot.
“Overall, due to a lower unemployment rate and rising wages, the payroll report was indicative of a stronger economy,” writes Navellier & Associates’ Louis Navellier.
Normally, the stock market would be expected to tank on that news. The Fed, after all, has said it wants the job market to weaken as it battles inflation. That’s not what has happened. The
S&P 500
has risen 1.7%, the
Dow Jones Industrial Average
has gained 1.4%, and the
Nasdaq Composite
has advanced 2.1%. What gives?
First, the jobs report wasn’t as strong as it appeared to be on the surface. February and March were revised lower by 149,000. Those revisions brought the three-month average down to 222,000 added per month, down from 295,000 at the end of March and nearly 320,000 at the end of February. That’s a downward trend, even if it’s moving more slowly than the Fed might like. Subtract the revisions from April’s number, and the total, at 104,000 is well below expectations.
“Bottom line, including the downward revisions we finally have a jobs miss relative to expectations after so many months of upside surprises,” writes The Boock Report’s Peter Boockvar.
Then there’s the fact that market action, with its tumbling banks, oil stocks, and anything else with a bit of cyclicality, had been suggesting recession worries–and this number suggests that there’s no recession, at least not yet. The
SPDR S&P Bank ETF
(KBE) is up 3.9% in premarket trading Friday, while the
Energy Selec
t SPDR ETF (XLE) has climbed 2.2%, higher than they were before the payrolls release.
For now, that all seems to be enough, especially given that the S&P 500 had dropped 2.6% for the week through Thursday’s close.
It’s almost enough to make one feel optimistic. Almost.
Write to Ben Levisohn at ben.levisohn@barrons.com
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