US stock future indexes are down fractionally, but falling, after the Labor Department reported the U.S. economy added 160,000 jobs in April, below expectations for 202,000 jobs. Oil prices fell this morning as investors cashed in on a 20-percent rise in crude prices over the past month, outweighing the impact of crude production cuts in Canada where a huge wildfire is disrupting oil sands operations. Markets are expected to open lower along with falling crude prices.
Here is the current market situation from CNN Money
WASHINGTON (Reuters) - The U.S. economy added the fewest number of jobs in seven months in April and Americans dropped out of the labor force in droves, signs of weakness that cast doubts on whether the Federal Reserve will raise interest rates before the end of the year.
LONDON (Reuters) - Stock markets in Europe and Asia struggled on Friday, with only monthly U.S. non-farm payrolls numbers standing in the way of shares globally racking up their biggest weekly fall since mid-February.
BEIJING (Reuters) - Apple Inc Chief Executive Tim Cook plans to visit Beijing later this month to meet high-level government officials, at a time when it is facing some setbacks in its most important overseas market, a source familiar with the matter said.
HONG KONG (Reuters) - The U.S. International Trade Commission (USITC) is launching an investigation into mobile devices made by eight smartphone vendors including Samsung Electronics Co over an alleged patent violation, the trade panel said on its website.
(Reuters) - Department store operator J.C. Penney Co Inc faced "an expense challenge" in April and in response cut payroll, froze overtime for its employees and took other cost-cutting measures, the New York Post reported, citing an internal memo.
LONDON (Reuters) - Oil prices fell on Friday as investors cashed in on a 20-percent rise over the past month, outweighing the impact of crude production cuts in Canada where a huge wildfire has disrupted oil sands operations.
So much for the only indicator that confirmed a "strong recovery." In yet another Goldman jinx which just two days ago boosted its payrolls forecast from 225K to 240K, moments ago the BLS reported that ADP's ominous print was right when it said that April payrolls rose only 160K, far below the 200K expected, and higher than just 1 of 92 economist expectations. This was the lowest print since last September's 145K.
Private payrolls rose 171K on expectations of a 195K print, with last month's 230K revised steeply lower to 184K.
The unemployment rate also missed expectations of a drop to 4.9% and stayed flat at 5.0%.
The March 215K job growth was revised lower to 208K, while the February was also revised lower from 242K to 233K for a net -19K drop.
* * *
According to the BLS, total nonfarm payroll employment increased by 160,000 in April. Over the prior 12 months, employment growth had averaged 232,000 per month. In April, employment gains occurred in professional and business services, health care, and financial activities, while mining continued to lose jobs. (See table B-1.)
Professional and business services added 65,000 jobs in April. The industry added an average of 51,000 jobs per month over the prior 12 months. In April, job gains occurred in management and technical consulting services (+21,000) and in computer systems design and related services (+7,000).
In April, health care employment rose by 44,000, with most of the increase occurring in hospitals (+23,000) and ambulatory health care services (+19,000). Over the year, health care employment has increased by 502,000.
The machines went wild when the dismal jobs data struck. The instant reaction was a complete crush of VIX (despite stocks tumbling, Gold surging, and bond yields plunging), but that rapidly turned around and now VIX is heading higher again...
broadly speakinmg it is "risk-off" for now but VIX is being manhandled to remain positive into the open...
In what may be one of the least relevant payroll reports in a long time as the Fed already knows the labor market is doing better quantiatively (qualitatively it has been all about low-paying jobs gaining at the expense of higher paying manufacturing and info-tech positions) and as has further demonstrated it is no longer jobs data dependent, here is what Wall Street consensus expects: total payrolls +200,000, down from 215K in March; a 4.9% unemployment rate; average hourly earnings rising 0.3% (last 0.3%) M/M and 2.4% Y/Y (last 2.3%); on labor force participation of 63%.
As RanSquawk adds, expectations are for a reading of 200K, squarely in-line with the Fed's benchmark figure, representing continued strength in the labour market. Given the middle of the road expectations, some may take note of yesterday's ADP report, which came in well below expectations (156K vs. Exp. 195K (Prev. 200K, Rev.194K) despite it being widely considered an unreliable indicator. Other recent labour market indicators show that the US labour market is still in fine health, however, the most recent Job Openings and Labour Turnout Survey (JOLTS) came in just below expectations (5445 vs. Exp. 5490, Prev. 5541, Rev. 5604) but printed a strong 5K+ reading none the less. Finally, last month's NFP report printed higher than expected unemployment (5.0% vs. Exp. 4.9%), although some noted that this was partly due to an uptick in the labour force participation rate. If the headline comes in reasonably close to the expected, this metric could garner particular focus given the weakness last time round.
The previous FOMC meeting saw the Fed keep rates on hold, with Esther George the lone dissenter and shed little light on the gradient of the rate hike path. They did however express a rather dovish tone on inflation expectations, and since then (April 27th) the USD has weakened significantly, printing fresh year lows in this week's session. Fed rheto ...
In what is the latest confirmation that nobody believes the "rally", the latest fund flow data from EPFR showed that US mutual fund and ETF flows turned sharply negative for stocks and high yield this past week (ending on May 4th). The outflow from stocks was $16.9BN following a $1.29bn inflow in the prior week. This was the biggest outflow from stocks since the Sep'15 capitulation on back of China devaluation.
In credit land it was likewise a rush into safety, with what BofA dubs a "massive preference for quality over junk in credit continues: largest IG bond inflows in 13 months contrasts with largest HY bond outflows in 3 months":
High yield flows turned to a $2.34bn outflow, driven mostly by just one ETF. High yield reported a $0.23bn inflow the week before. Inflows to high grade remained strong, however, falling marginally week over week to $2.76bn from $3.09bn. The decline was due to both an acceleration of outflows from short-term funds to $0.23bn from $0.14bn and a decline in flows outside of short-term funds to $2.99bn from $3.23bn. Both high grade funds ($1.75bn) and ETFs ($1.01bn) continue to report strong inflows (Figure 2).
-- this post authored by John Robertson and Ellyn Terry
The labor force participation rate (LFPR) is an important ingredient in projecting employment growth and the unemployment rate. However, predicting the LFPR has proven difficult. For example, in 2011 the Congressional Budget Office (CBO) projected that the LFPR in 2015 would be about 64.3 percent. In reality, the LFPR turned out to be 62.6 percent. Based on the CBO projection, the economy would have needed to create about 4 million more jobs to reach the 2015 unemployment rate of 5.3 percent.
It's jobs day, and we're about to find out how many more millennials found jobs, allowing them to move out of mom and dad's basement. Our call of the day gives stocks to buy if you want to bet on the new generation's spending power.
Treasury prices rose for a fourth session, pushing yields to a nearly four-week low, as investors bought government debt ahead of a key U.S. employment report that could affect the Federal Reserve's interest-rate policy.
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