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Finally, a Decent Number

The April nonfarm payroll showed a gain of  244,000 on Friday, exceeding expectations for the first time in many months. A statistical aberration took the headline unemployment rate back up from 8.9% to 9.0%. February and March were revised up an additional 46,000 jobs.

There were substantial employment gains across all fronts. Retail gained 57,000 jobs, business, 51,000, and manufacturing 29,000, taking new private sector jobs to 268,000. Only government employment failed to deliver, falling 24,000, the continuation of what I believe is a new decade long trend. This will get worse as already pink slipped teachers fail to get rehired this fall.

While this is a passable number, it clearly is not good enough. At this point in the economic cycle, we should be clocking 450,000 jobs a month, not half that. It gives more credence to my theory that the US is returning to a 2% growth rate, not the heady 3.9% seen in the decade past.

The financial markets seemed to agree with my assessment. Despite the best possible news, the Dow only gained a measly 54 points. Bonds fell, but only modestly, taking the ten year Treasury yield from 3.17% to 3.20%. The euro, crude, and gold, which all should have risen on this report, fell instead.

Was this a classic “but the rumor, sell the news” reaction? Or is there too much good news already priced into the market? You would be forgiven for thinking so after looking at the chart of new stocks hitting new highs the week before, and what usually follows.