A Goldilocks Jobs number drives S&P to a three week high

Equity markets are rallying higher following the release of the April BLS jobs report. The numbers came in lighter than expected on the Nonfarm Payroll and, most importantly, the Hourly Earnings. This was viewed as a "goldilocks" figure for the markets as it showed a decline in economic activity, but it did not fall off the cliff. It reflects a "soft" or "No" landing for the economy- the Holy Grail for the Federal Reserve.

The Hourly Earning numbers are important as it represents one of the first reading of inflation data for Q2. The market was still digesting the hot Employment Cost Index and Unit Labor Costs from earlier in the week. However, those figures are from the first quarter. Market participants were aware of pricing pressures given the February and March data sets. Those figures should not have come as a surprise.

The April Hourly Earnings number reflects a cooling trend in wages which has eased pressure on interest rates. The 10-year Yield slipped 10 basis points in reaction, sliding to 4.46%. This marks the lowest level for the 10-year since April 12 which was the day before the hot March CPI number rattled markets.

Equities are rallying on the news. The S&P Futures jumped from 5108 to 5147 in reaction. The index was sitting just below the 20-day moving average (5111). It is now eyeing up a test of the 50-day moving average (5171). 

Adding to the market fire is positive results and news from Apple (AAPL) and Amgen (AMGN). The companies are seeing a boost from capital return plans and future product growth prospects. But the key take away for the markets is the weighted importance of these names in the S&P, Nasdaq, and Dow Jones. This is aiding the post-jobs rally. 

In April, the U.S. Bureau of Labor Statistics reported a moderate increase in total nonfarm payroll employment, adding 175,000 jobs, though this figure is below the average monthly gain of 242,000 over the past year. The unemployment rate remained relatively stable at 3.9%, continuing to oscillate within a narrow range of 3.7% to 3.9% since August 2023. The labor force participation rate was unchanged at 62.7%, and the employment-population ratio also showed little variation, holding at 60.2%.

Job growth was noted in several key sectors. Health care added 56,000 jobs, maintaining close alignment with its 12-month average gain. Social assistance jobs increased by 31,000, exceeding its usual monthly additions, while transportation and warehousing sectors saw an increase of 22,000 jobs. Additionally, retail trade continued its upward trend with a gain of 20,000 jobs in April, with general merchandise retailers, building material and garden equipment suppliers, and health and personal care retailers seeing notable increases.

However, some industries experienced minimal changes. Construction employment saw a slight rise of 9,000 jobs, a slowdown compared to the previous month's increase of 40,000 jobs. Government employment also saw minimal growth, with a modest addition of 8,000 jobs. Other major industries, including manufacturing, wholesale trade, and leisure and hospitality, showed little to no change in employment figures.

Financially, average hourly earnings for all employees on private nonfarm payrolls increased slightly by 7 cents, or 0.2%, to $34.75, reflecting a 3.9% increase over the past year. The average workweek for all employees decreased marginally by 0.1 hour to 34.3 hours. The employment figures for February and March were revised, showing a combined 22,000 fewer jobs than previously reported, highlighting the ongoing adjustments and reassessments typical in labor market analyses.