Friday night (May 7), the U.S. April non-farm payrolls recorded an increase of 266,000, much lower than the expected increase of 978,000; the U.S. April unemployment rate recorded 6.1%, compared with 5.8% expected, the previous value of 6%. after the release of the April employment report, interest rate futures traders cut bets on the Fed to raise interest rates.
After the data was released, spot gold pulled up briefly and once stood at $1,840 before falling back nearly $10; spot silver rose briefly by nearly $0.5 to $27.62/oz. The most active gold futures contract on the COMEX was traded instantly at 20:31 GMT on May 7 with 5,043 lots traded on the trading desk in one minute, with a total contract value of $923 million.
The U.S. dollar index fell nearly 30 points in the short term and is now at 90.66. Non-U.S. currencies were generally higher, with the euro rising 60 points against the dollar in the short term, the pound rising 40 points against the dollar in the short term, and the Australian dollar rising 40 points against the dollar in the short term. The U.S. 10-year Treasury yield fell more than 10 basis points in the short term and now stands at 1.46%.
In addition, non-farm payrolls in February were revised up to 536,000 from 468,000; non-farm payrolls in March were revised down to 770,000 from 961,000. The U.S. Department of Labor said the revised February and March combined nonfarm payrolls were revised to 78,000, lower than previously reported.
The U.S. Department of Labor said growth in leisure and hospitality, other services and local government education employment offset declines in short-term services and transportation employment.
U.S. job growth unexpectedly slowed in April, mainly due to employers’ difficulty in hiring employees, which dampened the labor market’s growth momentum. From manufacturing to the restaurant industry, employers are struggling to recruit the right employees. A variety of factors are contributing to the labor shortage, including parents remaining at home to care for their children, the new crown epidemic forcing some to retire, and the government’s generosity in issuing unemployment benefit checks.
As a result of the job openings, some states have begun to take action to alleviate the labor shortage. Montana is trying to lure people back to work with a $1,200 subsidy, provided they stop receiving unemployment benefits and work for at least four weeks. South Carolina plans to end all pandemic-related federal unemployment programs at the end of June.
CNBC said the employment picture was very disappointing in April, with nonfarm payrolls rising by 266,000, well below expectations, the unemployment rate rising to 6.1 percent and the shortage of available labor intensifying.
Analyst Valeria said the poor numbers mean that the Fed’s ultra-loose monetary policy is on the right track and supports the idea of long-term easing. Minneapolis Fed President Kashkari also said the April jobs report validated the Fed’s outcome-oriented policy and that he would like to see employers raise wages, with much fiscal support still in the pipeline.
Analyst Cameron Crise pointed out that the U.S. non-farm payrolls data for April was shockingly poor, all of which points to a lack of growth in low-skilled jobs. The April number was particularly weak considering the number was also revised downward by 78,000 in the past two months. Predictions of a contraction in the Fed’s bond-buying program should cool for a while. This in turn will support U.S. Treasuries, even if only temporarily, which may prove to drive the initial reaction of the equity P/E market is bad news is good news.
NATIXIS U.S. Chief Economist JOSEPH LAVORGNA noted that the very weak non-farm payrolls report means that there is no inflationary pressure from the job market side; the economic and job market recovery continues, although it may be losing some momentum; this is still expected to be a recovery year, although small businesses are not optimistic about the economic outlook for a variety of reasons, and if there are major spending and tax plans rolling out, the economy could be damaged next year.
Note that tonight at 23:30, Biden will deliver a speech on the April jobs report. The financial blog Zero Hedge says the White House has planned a high-level response to the report. It will be interesting to see how Biden will interpret this huge data discrepancy, which will at least allow the Fed to avoid talking about tapering its bond purchases for the next few months.
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