The Good News And The Bad News In March's Payroll Report

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Includes: DIA, QQQ, SPY
by: BubbleBustInvesting

Summary

March payroll was strong.

But so were earnings.

That raises fears that the Fed will raise interest rates sooner than later.

There's good news and bad news in today's Payroll Report. For Wall Street, that is.

The good news is that the U.S. labor market picture is improving, and is improving faster than markets have been expecting, according to a regular labor market report published Friday morning. Total nonfarm payroll employment rose by 215,000, the U.S. Bureau of Labor Statistics, thanks to continuing hiring in retail trade, construction, and health care, which registered strong job gains.

The bad news is that earnings rose ahead of expectations, and that could prompt the Federal Reserve raise interest rates sooner than later.

Still, Tara Sinclair, Chief Economist for job site Indeed, isn't concerned:

"The increase in average hourly earnings of 7 cents, especially following the 2-cent decline in February, is what we expected to see due to signs of strong employer demand. But the fact is, if there are more people coming back into the workforce, employers have less of an incentive to increase wages, and we will continue to see only moderate wage growth."

Wall Street seems to agree, as it quickly erased morning losses, heading higher in early afternoon trade.

Major Equity Indexes at 2pm

Index

Friday's

Performance (%)

SPDR S&P 500 Trust (NYSEARCA:SPY)

+0.42

PowerShares QQQ Trust (NASDAQ:QQQ)

+0.76

SPDR Dow Jones Industrial Average (NYSEARCA:DIA)

+0.43

Click to enlarge

The trouble is that Wall Street is disconnected from economic reality these days, racing towards new highs, as profits drop-see table.

That's why I'll be very careful before committing new money to stocks at this point.

Q4, 2015: The Economy Versus Wall Street

Statistic

Change

Corporate Earnings growth*

-15%

S&P Pro forma EPS+

-3.6%

Employee Compensation Share In GDP

53.6% (+0.80)

Labor Productivity

+0.5%

GDP Deflator

+0.9%

SPDR S&P 500 ETF

4.55%

SPDR Dow Jones Industrial Average ETF

5.72%

PowerShares QQQ ETF

+7.55%

Click to enlarge

*GDP report, Department of Commerce

Disclosure: I am/we are long QQQ.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.