Good Friday Jobs Report: Catalyst For A Correction?

Includes: AA, DIA, QQQ, SPY
by: Raymond Wiacek

With the jobs report on Good Friday signaling a decline in hiring rates across the US, many are beginning to wonder if this rally is finally over and whether a market correction is looming around the corner.

The major averages have posted the worse 4 day decline as of Monday after responding to the jobs report and remarks by Federal Reserve Chairman Ben Bernanke regarding his thoughts on pulling QE3. Analysts interviewed on CNBC following the decline on Monday point to a possible 10 percent correction in the markets in the coming future, citing lower expectations for earnings and decreased bond buying by the Federal Reserve.

The jobs report on Good Friday signaled a huge miss by analysts. They expected an increase of 240,000 jobs for the month of March, however the statistic that the Labor Department released on Friday was half that at 120,000. Equity markets were closed for Good Friday; however futures were open until 9:45am. Traders had a short time to digest the data which was very clear, and the Dow Futures plummeted as much as 160 points.

This was the first time since November that the Labor Department reported a number below 200,000. Economists point to unseasonably warm winter as the culprit for the low number, which meant companies held employees in January and February who could have been added in March and April. Although the unemployment rate still fell to the lowest level since January of 2009 at 8.2%, the decline in the jobs report was mainly due to people dropping out of the labor force. This is more often a negative sign signaling that jobs have become harder to find.

The biggest increase among employers was that of manufacturers, who hired about 37,000 employees alone in March. Restaurants also added about 37,000 jobs and healthcare jobs rose by 26,000. The only sector to show a sizeable decline was the retail sector, which shed about 34,000 employees and the government, which cut only 1,000.

The average hourly wage rose by 5 cents for the month of March to $23.29 which is factored into the 2.1% increase year to date. The reason for such a low raise in wage is due to the majority creation of jobs in lower paying fields.

Despite the increase in hiring since the lows of the recession, the private sector still employs 4.8 million fewer people than it did before the start of recession in September of 2008. According to an article by Jeffry Bartash of, these jobs are not expected to return for another 3 years at the current pace of hiring.

Things to look for in the short term are earnings season which kicked off on Tuesday with Alcoa (AA). In addition, Ben Bernanke has noted that he is not in favor of QE3 in the future, stating that the market is in a rebound and is showing signs of improvement. However, he has not completely ruled QE3 out. Friday's jobs report brought back fears of what happened in the early part of the past two years, when signs of strength slowly lost ground as the months went by.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.