Jobs Growth Disappoints Lofty Expectations | Daily Market Update

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Friday, May 7, 2021

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Jobs growth disappoints lofty expectations

  • The U.S. economy gained 266,000 jobs in April according to the U.S. Bureau of Labor Statistics, falling well short of Bloomberg survey estimates for a 1,000,000 gain.
  • The unemployment rate rose 0.1% to 6.1%, though that was paired with a rise in the labor force participation rate to 61.7% that equaled a recovery high.
  • While this report surely disappointed investors expecting to build on March’s strong number, we remain optimistic regarding the broader trend moving forward.
  • We take a closer look at the state of the U.S. labor market in today’s LPL Research blog, available after 12p.m. ET today.

Daily Insights

U.S. equities pointing toward a mixed open amid the April non-farm payroll announcement this morning

  • The Nasdaq Composite is sharply higher on prospects for slower growth and lower rates, while the Dow is little changed.
  • European markets are mostly mixed through midday trading as Germany reports improved production and export results for March.
  • Asian markets were also mixed as China reported over 30% year-over-year growth in April exports.

Let’s make a deal

  • Thursday, President Biden signaled he was open to a compromise over upcoming stimulus. He suggested the $4.1 trillion price tag on infrastructure and social programs could come down.
  • Additionally, the 28% corporate tax rate (currently 21%) could come down to between 25% and 28%.
  • Moderate Democratic Senator Joe Manchin from West Virginia has been pushing for 25% and all 50 Democrats in the Senate must agree for the bill to pass.
  • We continue to think that when all is said and done a 25% corporate tax rate and slightly less than $3 trillion in new stimulus is where things will land, as the 50/50 Senate and historically small majority in the House for the Democrats will make it very tough for them to get everything they want.

Commodities soar to five year highs

  • Industrial metal and material prices such as lumber have soared in the past year, spurred on by restricted supply and booming demand.
  • However, earlier this week the diversified Bloomberg Commodity Index, which represents 23 unique contracts ranging from gold to lean hogs, broke out to its highest level since August 2015.
  • We take a look at the chart and whether or not we think this can continue in the latest LPL Research blog.

Technical update

Today’s jobs number and the interpretation of potential Federal Reserve (Fed) ramifications will likely move markets, but the S&P 500 Index has spent the past 17 trading days in a 100-point range from 4118-4218. Look for an eventual break outside of this range to determine the direction of the next move.

Time To Sell In May?

LPL Research notes some possible reasons for a pause in the rally and why any potential pullbacks won’t last very long. Learn more in this week’s Weekly Market Commentary .

Read Weekly Market Commentary

Sell in May?

On the LPL Market Signals podcast, Chief Market Strategist Ryan Detrick and Equity Strategist Jeff Buchbinder punch holes in the “Sell in May” axiom and reflect on how the economic data continues to come in extremely strong as the economy opens up faster than expected.

 

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