The U.S. labor market remains front and center today following
another disappointing monthly jobs report this morning. This is
becoming a trend now, with three back-to-back monthly jobs reports
It appears that the brief spurt of labor market momentum during
the winter months is now firmly behind us and the labor market is
losing steam. The question at this stage is whether these jobs
numbers are bad enough to prompt a fresh response from the Fed.
But irrespective of what the Fed does or does not do, they are
not good enough to produce a meaningful improvement in household
Jobs no doubt remain the day's top item, but questions about
global growth will not be far from investors' minds either. We will
get the May manufacturing ISM survey results a little later, with
expectations of a modest pullback from the April level.
But the same data for China and Europe this morning doesn't
inspire much confidence. The official Chinese PMI data for May came
in weaker than expected and remains barely in expansionary
territory. The rest of the emerging world is not looking much
better either, with the Indian economy expanding at its slowest
pace in three years in the first quarter and the outlook for
Indonesia and South Korea not that good either.
The U.S. economy is not as trade-dependent as many of these
other economies and can sustain moderate growth on its own. But
this decelerating growth outlook for the emerging markets is
nevertheless a headwind for the corporate sector. Don't forget that
more than a third of the revenue of the S&P 500 companies come
from abroad, with emerging markets accounting for a fast-growing
On the jobs front, the Bureau of Labor Statistics (BLS) reported
May non-farm payroll gains of 69K, less than half of what was
expected and below April's 77K (revised down from 115K originally).
Ominously, revisions for prior months reversed the positive trend
of many months and turned negative. The April and March tallies
were sharply revised lower from the original levels, likely
indicating a serious loss of momentum.
Private sector jobs totaled a meager 82K, compared to 87K in
April, with a number of sectors (construction/leisure &
hospitality) suffering major jobs losses. These numbers are even
weaker than what we saw from
Automatic Data Processing
) on Thursday.
The unemployment rate, which comes out of the Household survey,
increased to 8.2% from 8.1%. Average hourly earnings increased 0.1%
after an increase of the same magnitude in April. The labor force
participation rate, whose low level in this recovery has been a hot
topic as evidence of discouraged workers, increased to 63.8% from
63.6% in April.
In corporate news,
), the maker of women's accessories, came out with
better-than-expected first quarter results, while
) came short of expectations. The post-IPO lockup period for
), the daily-deal company, ends today.
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