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Solid April US jobs report undermines case for Fed cut soon

FILE PHOTO: People walk on a New York City street

NEW YORK (Reuters) - U.S. employers boosted hiring in April while raising wages for workers, pointing to sustained labor market strength that could see the Federal Reserve keeping interest rates higher for some time.

Nonfarm payrolls rose by 253,000 jobs, the Labor Department's employment report showed on Friday, while March was revised lower to 165,000 jobs added from 236,000. Economists polled by Reuters had forecast payrolls rising by 180,000. The unemployment rate fell to 3.4% from 3.5% in March and average hourly earnings gained 0.5% after advancing 0.3% in March.

MARKET REACTION:

STOCKS: S&P e-mini futures extended a gain and were last up 0.8%

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BONDS: The yield on 10-year Treasury note rose and was last up 10.8 basis points from the close at 3.460%; The two-year U.S. Treasury yield was up 15.6 basis points from Thursday at 3.883%.

FOREX: The euro slipped more and was 0.3% lower against the dollar, while the dollar index was about 0.3% firmer

COMMENTS:

ART HOGAN, CHIEF MARKET STRATEGIST, B. RILEY WEALTH, NEW YORK

"This labor market while slowing, is certainly not showing signs that we're anywhere close to entering a recession. That's good news."

"We are of the belief that the Fed has completed their rate hikes, therefore, we can now view good economic data as being good for the market. We can remove the lens of 'what does this mean for monetary policy' and look at good news as being good news."

ADAM SARHAN, CHIEF EXECUTIVE OF 50 PARK INVESTMENTS IN NEW YORK

"The expectation (for NFP) had been slower because you had a lot of people are concerned about a possible recession in the near future."

"And so far the data continues to show the US economy remains very strong. The market doesn't want the Fed to raise too much because then you have high inflation, but this number wasn't too strong."

"Here's the first big data point we received since the Fed meeting and it shows us that the Fed is killing the situation where it's not forced to raise rates more aggressively, but it's not in a situation where it has to cut rates either more aggressively.

ANTHONY SAGLIMBENE, CHIEF MARKET STRATEGIST, AMERIPRISE FINANCIAL, TROY, MICHIGAN

“It's definitely telling you that the job market is still hot. It’s a little bit concerning that the inflation number, the average hourly wages, that ticked up. To me it communicates two things. The Fed still has some work to do and the job market’s hot. So the 25 basis points that they raised this week was justified. It also tells me that maybe the Fed is this right in terms of they can cool some of the inflation pressures in other areas of the economy, knowing that it's not going to have a real big detrimental impact on the labor force.”

“The market is excited that maybe the Fed is done raising interest rates and that they're actually going to cut later this year, while at the same time the Fed is telling you that that's not really what their position is. And we have these job numbers that are showing that there's still some work to do.

“I just don't see an environment where the Fed is cutting interest rates later this year, other than inflation is rapidly declining, which means growth in the economy is rapidly declining. That’s unlikely to be positive for job growth in that environment.

“The market’s interpretation of where Fed policy will be at the end of the year does not square with the numbers that we're getting or what the Fed has been telling us.

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

“It was a hotter than expected report, it certainly didn’t show any cooling in the labor market. Hourly earnings were a little higher than I was looking for.”

“Bottom line, this is a strong report and shows that the labor market is resilient. It bails out the Fed for raising another quarter point. The weakening of the job market seems to have stalled.”

“The puzzle is we don’t see layoffs showing up in the numbers, we’ve see layoffs all over the place but job creation is strong.”

“We’re not seeing wages coming down. It’s still a market that shows that the employers are at the mercy of the employees.”

RICK MECKLER, PARTNER, CHERRY LANE INVESTMENTS, NEW VERNON, NEW JERSEY

"I don't think it's really outside the realm of what's expected in the sense that it's been a very start-and-stop economy, and the monthly numbers have been a little inconsistent. So I think the real focus is on the inflation numbers, and what's happening with wage growth. There's always been a shortage of workers in a lot of industries, and what you're seeing is despite layoffs some of the open jobs are being filled."

PETER ANDERSEN, FOUNDER, ANDERSEN CAPITAL MANAGEMENT, BOSTON

"It's a strong number and it will just simply add to the continuous confusion of analysts."

"If it were just this metric in a vacuum, investors would cheer the results and the market would rally, however, it is presented to us against a very upsetting background of continued bank failures, speculation that more banks might fail, how will the Fed react to the recent new failures, so it's a complicated scenario."

"We have one side of the ship that is saying we're headed for a recession, the other side, which is not as equally populated is saying that we are enjoying a recovery."

"I think we are enjoying a recovery in spite of all the negative events that have happened this past week."

BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN“The employment situation has gone from great to merely good. Directionally, that’s what the Fed has been hoping for, though the upswing in hourly earnings may raise a few eyebrows at the Fed. The revisions to previous months’ numbers were significant, so things weren’t as great as first reported. The index of aggregate weekly hours moved up a bit in April from March, but it had been on a downward trend. Manufacturing is stuck in the mud with only 45% of manufacturing industries posting job gains. Total private sector breadth of gains has fallen to 57.4%. It’s a slow slide into a shallow recession so far, but it’s a slide from a relatively good place.”

STEVE RICK, CHIEF ECONOMIST, CUNA MUTUAL GROUP, MADISON WISCONSIN (emailed)

“It is encouraging to see a strong jobs report amid recession concerns, instability in the banking sector and ongoing layoffs. We are hopeful the continued strength of the jobs market and signs of slowing inflation will ease market volatility in the coming months. We expect the unemployment rate to remain below the natural rate of 4.5% in 2023. We will continue to pay particular attention to factors that could impact the jobs market, such as further interest rate hikes, continued volatility in banking, inflation and supply chain disruptions.”

“We’re anticipating a mild downturn in the second half of 2023 as consumers’ spending slows. Last week’s first quarter GDP rate announcement was cooler than expected and evidence the economy is beginning to slow down. These factors could result in halted job growth in the next few months, but this month’s strong report indicates that interest rate hikes have yet to impact tight unemployment conditions.”

(Compiled by the Global Finance & Markets Breaking News team)