The unemployment rate ticked down to 7.5%, the lowest it's been
since December 2008. This was made possible by 165,000 jobs
created in April, according to the Labor Department.
Estimates in the beginning of the week were for 155,000 jobs, but
expectations came down throughout the week after the big
disappointment in the ADP reading to 135k.
Perhaps the bigger news and the true motivator for both the
markets and for confidence were the revisions, which added an
additional 124,000 jobs in March and February than previously
The number of new jobs created in March was revised up to
138,000 from 88,000 and February's figure was revised up to 332,000
from 268,000. With the "new" data, the number of jobs created in
February was the highest since November 2005 for any month if you
back out temporary Census bureau hiring.
One bit of data that I tend to focus in on in particular is the
Labor Force Participation Rate, which remained steady over the last
couple months. A dropping participation rate can skew the
data and lower the unemployment rate artificially as workers are
leaving the workforce. But the fact that it has remained
relatively stable helps with assuring that jobs are actually being
created and unemployment is on the decline.
Also in the data, we saw that the average workweek fell two
ticks in April to 34.4 hours. Longer workweeks are usually a sign
of a strong economy and it is important to note that workweek
length remains near a pre-recession high. But are workweek
lengths high because companies are trying to squeeze every last
drop of productivity from workers? Or maybe workers
themselves are working harder to keep their jobs?
As a realist, I can't help but speculate the positive and the
negative. When I look back at the last 3 years, May has been
the high point of the Jobs number and the stock market and I can't
help but look at those data and think that history could be
Over the last three years, you should know that overall
manufacturing PMI has been decreasing on average and that services
PMI tends to peak right around the same time as the employment
numbers in May and then drop off.
There are a plethora of additional factors (including market
valuation / earnings growth) that seem to be playing out just as
they have at least in the past 2, if not 3 years that point to this
being the top of the market and the employment strength for the
What Do You Think Happens to Employment and the Stock
Market After May?
1. Employment peaks with the
stock market and both begin to move lower.
2. Employment flat with the
stock market flat
3. Employment flat and
market continues higher
continues to improve and markets move higher
continues to improve, but markets selloff because the Fed is more
likely to back away
**Please briefly explain your thesis.
I believe this is the peak in employment growth for the year
(at least until October). I believe that the coming months
will be must less robust in terms of employment growth with several
misses; this will drive most richly valued stocks lower (the broad
market). It seems to me that too many data are pointing to
slowdown and yet valuations are richer than they have been in the
last three years. I this it will be increasingly difficult
for traders to justify these levels, especially with negative
revenue growth.SPDR-SP 500 TR (SPY): ETF Research ReportsTo read this article on Zacks.com click here.Zacks Investment