Strong April Jobs Report - Analyst Blog

With Thursday’s harrowing trading turmoil still on everyone’s mind, the market received a dose of positive news today as non-farm payrolls increasing a better-than-expected 290,000 in April. The unemployment rate, however, edged up to 9.9% from 9.7% as workers came back to the labor market looking for jobs.

With census-related temporary hirings adding 66,000 to the April jobs tally, the private sector added an impressive 224,000 jobs last month. The March tally was increased to 230,000 from the originally reported 162,000 gains. There were 39,000 census-related hirings in the March number.

The U.S. economy came out of the Great Recession in 2009’s third quarter and has since produced three back-to-back positive GDP reports. While transient factors, such as inventory adjustments, accounted for a larger share of the earlier GDP expansion, recent growth numbers have resulted from more stable and recurring factors, such as consumer spending. We have seen evidence of economic improvements in other areas as well, including manufacturing, productivity, and consumer confidence.

A key laggard in this otherwise improving macro backdrop has been the labor market. While the labor market has been giving out positive signals for a while now, it hasn’t really started creating jobs at a pace given the hole that we are in. Keep in mind that the U.S. economy shed approximately 8 million jobs in this downturn and it will be years before we get anywhere near pre-recession levels.

The market has been preoccupied with the outlook for Europe given the very real Greek contagion fears and concerns about China’s slowdown. And these are by all means critical headwinds for the global economy. The market appears to have taken the earnings strength in stride, as evidenced in first-quarter results, and does not appear to be overly concerned about the Fed either. Today’s payroll report, though a net positive, doesn’t materially change that outlook.

Zacks Investment Research