April 2014 Employment Situation

Last Friday at 8:30am est, as usual, the Bureau of Labor Statistics released its monthly Employment Situation.  The figures for April were, I think, unadulterated good economic news.  The country added +288,000 jobs last month, +273,000 in the private sector and 15,000 in government.  Revisions to estimates of job gains for February and March were upped by a total of +36,000, as late submissions from participants in the government’s elaborate Establishment Survey were tallied.

These figures seem to me to show that the horrible winter had a much greater negative effect on hiring (and consumer spending) than the consensus had thought.

Maybe “unadulterated” was an overstatement, though.  In addition to its Establishment Survey, a set of regular reports from a group of companies and government agencies that generate the job gain numbers, the BLS also does a Household Survey.  It’s a set of interviews with randomly selected individuals, from which, among other things, the BLS determines the unemployment rate.  The Household Survey numbers tend to bounce all over the place from month to month.  Last month, for example, the HS indicated that about a half million people stopped being discouraged workers and rejoined the workforce; this month the HS indicated all of them, plus another 300,000 got discouraged again and moved out of the workforce.

Why these people would go looking for work in the freezing cold and then stay home once the sun came out is unclear.  But that’s what the HS said they did.  And the lost 800,000–the reason the unemployment rate dropped to 6.3%–is the datum (like the word?) market pundits have seized on.

“They can’t be serious, can they?” is my first thought.  Then I remember the mind-dulling irrelevance of most financial tv/radio and conclude, sadly, that they can.

Why isn’t Wall Street greeting the Employment Situation more warmly?  I think it has nothing to do with the “lost” 800,000 workers.  Rather, I think investors know the ES numbers are strong–and are evidence in favor of the Fed’s belief that the domestic economy is swell enough to leave intensive care.  This implies that the slow move to higher interest rates will continue apace.

stock market implications

Potential acquirers have a new reason to speed up their activity to lock in financing for their acquisitions at low rates.  So M&A will pick up.

We’ll have more days like Friday–flattish overall market action, with strong moves, both up and down, in individual stocks based on company-specific news, especially the quality of their earnings reports.



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