Equities Plunge Amid Weak Jobs Data
The government-run employment report, also known as nonfarm payrolls, measures the monthly change in employment excluding the farming sector.
Job creation in the United States is the primary indicator of consumer spending, which accounts for two-thirds of GDP.
According to the U.S. Bureau of Labor Statistics, Nonfarm payroll employment rose by 115,000 in April, which was lower than analysts' estimates of 160,000, and the unemployment rate was little changed at 8.1 percent, which fell from 8.2% in March.
Total nonfarm payroll employment rose by 115,000 in April. This increase followed a gain of 154,000 in March and gains averaging 252,000 per month for December to February.
In April, employment rose in professional and business services, retail trade, and health care. Transportation and warehousing lost jobs over the month.
The average workweek for all employees on private nonfarm payrolls was unchanged at 34.5 hours in April. The manufacturing workweek edged up by 0.1 hour to 40.8 hours, and factory overtime rose by 0.1 hour to 3.4 hours.
The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.8 hours.
After the 8:30 a.m. ET release, U.S. equity markets plunged. Currently, the Dow Jones Industrial futures are trading down by about 51 points or 0.39%.
Traders who believe that nonfarm payrolls is a leading indicator for the US economy, you might want to consider the following trades:
- Short general retail companies like JC Pennny (NYSE: JCP) because as more people have increasing incomes from jobs, the more likely people will spend it. In theory, the economy will likely grow stronger, as consumer spending is two-thirds of US GDP.
- Also, long Consumer Discretionary companies like Target (NYSE: TGT) or the Consumer Discretionary ETF (NYSE: XLY)
Traders who believe that nonfarm payrolls is not a leading indicator for the US economy, you might want to consider the following trades:
- If the data is showing mixed signals, long Consumer Staple companies like Procter & Gamble (NYSE: PG) and Colgate (NYSE: CL) because even if people have less money, they still need to buy staple products like shampoo and toothpaste.
- Also, short big-ticket appliance makers like Whirlpool (NYSE: WHR) if the report worse-than-expected.
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