Not too hot, not too cold, but just right – that sums up today’s employment report nicely. Capping off a very busy week full of corporate earnings reports and the latest Fed announcement, this morning’s jobs report showed that hiring remains at a healthy level but also helped to reassure investors who had suddenly become concerned about recent signs of overheating. The data showed that 175k jobs were created in April, which was a little below forecasts of 240k jobs. Likewise, the unemployment rate unexpectedly ticked up to 3.9% from 3.8%, and both average hourly earnings and the average workweek came in a touch light.
Normally, markets would be sent spiraling by what appears at first glance to be a series of “misses” compared to consensus estimates. Instead, so far, we’re seeing a lot of green on the board with equities jumping and bond yields falling. This time, the twist is because of a series of other data recently underscoring that inflation has been stickier than expected this year, squashing hopes for the Fed to begin cutting rates anytime soon. A “hot” jobs report today with numbers coming in above expectations would have whipped those fears into a frenzy with traders pounding the “sell” button. So, investors can breathe a sigh of relief for now. A firm but not too hot labor market is exactly what a very data-dependent Fed is looking for to begin cutting rates later this year.
Source: Bloomberg, BLS, as of 5/3/24
Carl Noble, CFA®
Senior Vice President of Investments
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