It was unemployment day and the data was mixed despite the higher than expected gains of 253K for the current week. The month gain was comfortably higher than the 180K estimate.

However, job growth has moderated after including the revised figures for its February and March figures. Those revisions lowered the two months by 149K, taking the average monthly job gains over the past three months to 222,000, compared to 524,000 a year ago. The average is the lowest since January 2021.

On the strong side was the unemployment rate which dipped to 3.4% from 3.5%, matching its multi-decade low, while average hourly earnings rose more than anticipated, up 4.4% from a year earlier and 0.5% MoM (vs 0.3% estimate). Higher labor costs could lead to inflationary pressure and clearly, the unemployment rate at multi-decade lows also has the potential to increase inflation if those costs are passed on the the consumer.

Drilling into the major employment sectors:

  • Professional and business services: Employment in this sector continued to trend up, adding 43,000 jobs in April. Professional, scientific, and technical services saw an increase of 45,000 jobs, while temporary help services continued to trend down, losing 23,000 jobs.

  • Health care: The sector added 40,000 jobs in April, with employment trending up in ambulatory health care services (+24,000), nursing and residential care facilities (+9,000), and hospitals (+7,000).

  • Leisure and hospitality: Employment in this sector continued to trend up, adding 31,000 jobs in April, mainly in food services and drinking places (+25,000).

  • Social assistance: The sector added 25,000 jobs in April, with individual and family services contributing 21,000 jobs.

  • Financial activities: Employment increased by 23,000 in April, with gains in insurance carriers and related activities (+15,000) and real estate (+9,000).

  • Government: Employment continued its upward trend, adding 23,000 jobs in April.

  • Mining, quarrying, and oil and gas extraction: The sector added 6,000 jobs in April, mainly in support activities for mining.

Employment in other major industries, such as construction (+15K), manufacturing (+11K), wholesale trade, retail trade, transportation and warehousing (-2.2K), information (+1K), and other services (+0.5K), remained largely unchanged in April. Goods producing jobs added 33K versus -17K last month, while services added 197K versus 140K last month

Job growth needs to moderate further for the Federal Reserve to stop worrying about inflation problems. The central bank has signaled that it will likely hold off on raising rates when it convenes next month, providing some breathing room to assess the labor market's progress. Despite challenges stemming from the Fed's rate-hiking campaign and turmoil in the banking sector, hopes remain for a smooth transition of the job market back to pre-pandemic norms.

St. Louis Fed President James Bullard was the first Fed member since the Fed hiked rates by 25 basis points on Wednesday and post the US jobs report to speak. Bullard is considered more of a hawk, but has softened up a bit lately.

Bullard believes that the recent quarter-point rate hike is a good step, moving the Fed above 5%, but acknowledges that there is still a lot of inflation in the economy. He does not see a recession as the base case, but rather slow growth and declining inflation. With today's stronger-than-expected jobs report, Bullard notes that the labor market is tight and will take time to cool. He thinks regional banks will do just fine despite some issues, and that the Fed can still achieve a soft landing. The recent drop in market interest rates may be overshadowing the impact of credit tightening from bank stress, but Bullard believes its ultimate impact on the economy will be small. He warns that Wall Street may be unprepared if inflation persists and the Fed has to do more with rates. The current policy is at the low end of the restrictive zone, and Bullard suggests that the Fed may have to "grind higher" on rates due to a slower decline in inflation. He remains data-dependent and open-minded about the June meeting, calling the recent jobs report "impressive" but highlighting that there's still a long way to reach balance in the labor market.

The comment that he is still confident of a soft landing caught the stock market's attention and helped to extend gains toward new extremes. The Dow had its biggest day since early January. The NASDAQ index closed within a few points of its highs from 2023. The S&P had its 4th largest percentage gain of the year. All 3 indices snapped 4-day losing streaks to start the month of May:

The final numbers are showing:

  • Dow industrial average increased 546.64 points or 1.65%. For the trading week the index fell -1.24%
  • S&P index rose 75.03 points or 1.85%. For the week, the index fell -0.80%
  • NASDAQ index rose 269 points or 2.25%. The index for the week rose 0.07%

In other markets

  • Gold fell $-33.95 or -1.66% at 2015.94. For the trading week gold rose 1.32% despite the sharp declines today as it reacted to the banking concerns and lower rates earlier this week. Today, both regional bank stocks and US rates rose.
  • Silver fell $-0.37 or -1.43% at $25.64. Silver rose 2.42% this week.
  • WTI crude oil rose $2.76 or 4.03% to $71.32. Crude oil fell -7.09% on global growth concerns despite the sharp rise today. Yesterday the price fell to the lowest level since December 2, 2021 when it reached $63.65, but bounced back quickly
  • Bitcoin is marginally higher at $29,541.

In the Forex market today, the AUD is ending as the strongest followed by the CAD. Both were helped by risk-on sentiment. The CHF and JPY were the weakest as the flight into the relative safety of those currencies was reduced.

Forex
The AUD is the strongest and the CHF is the weakest.