Friday, May 6, 2011
The negative build-up over the last few days to today’s jobs report turned out to be completely off the mark. We got an impressive jobs report this morning, with the private sector coming up with one of its best showing in a long time.
The Bureau of Labor Statistics reported the creation of 244,000 jobs in April, handily coming ahead of expectations. This is one of the best jobs report in a very long time. Importantly, the private sector added 268,000 jobs in April, up from the March tally of 231,000, with broad-based gains across all sectors. On the negative side, the unemployment rate jumped to 9% in April from 8.8% in March, reversing the rapid decline of the preceding months.
Today’s report is the first positive indicator following a host of troubling signs lately showing a stalling in the labor market momentum. Jobless claims started moving in the wrong direction in the last few weeks after coming down to the under-400K level through March. The employment components of the ISM indexes gave ground last month, after showing consistent strength in the preceding months. The April ADP report was not only weaker than expected, but was below the monthly run rate of the first quarter. Today’s report, particularly the private sector strength, should help reverse the negative news flow of the last few days.
The notable earnings reports came after the close on Thursday. Priceline (PCLN) came ahead of top- and bottom-line expectations as Visa (V), the credit card payment processsor. Pricing and efficiency gains helped Kraft (KFT) offset the rise in input costs that tripped up other operators like Kellogg (K) and Sara Lee (SLE). Kraft’s beat reflected its ability to expand its margins in an overall tough operating environment.
The market was getting nervous about the health of the economy over the last few days. Today’s jobs report should help reassure the market that the recovery was on track. I am looking for solid gains acrosss the board, not just in stocks, but also in commodities.
Sheraz Mian
Director of Research
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