Market News – May 6, 2019

U.S. LABOR MARKET KEEPS HUMMING:  In April, the U.S. economy added 263,000 new jobs.  That is the 103rd consecutive month of positive job creation in the U.S. The unemployment rate dropped to 3.6%, the lowest it has been since December 1969.  The drop in the unemployment rate was caused by the large increase in jobs and a 490,000 who dropped out of the labor force.  The Labor Force Participation Rate dropped to 62.8%, exactly where it was a year ago.  Average hourly earnings increased 0.2%, and 3.2% from a year ago.

U.S. LABOR PRODUCTIVITY IMPROVING:  During the past year, U.S. labor productivity has improved at its best pace in about ten years.  This is a great leading indicator for wage growth and continued economic expansion.  Productivity, measured as the output of goods and services for each hour on the job, increased by  3.6% in the first quarter from the prior quarter according to the U.S. Labor Department. From a year earlier, productivity rose 2.4%. That was the best gain year-over-year since the third quarter of 2010.

GRINDING HIGHER:  A rally on Friday, caused largely by positive labor market news, kept the week positive for U.S. stocks generally.  Although the rate of ascent has slowed, stock prices keep moving higher.  The major U.S. stock indices have just had their best four months to start a year since 1999.

FED HOLDS THE LINE:  After indicating a reluctance to raise interest rates more in 2019, many were beginning to expect that the Fed might cut rates last week.  In fact, expectations of such were being priced into the stock market.  Last week, the Fed announced that by unanimous vote its key interest rates were staying put.  “I see us on a good path,” Fed Chairman Jerome Powell said in a press conference after the latest two-day meeting.  Inflation has dipped a bit, causing many economists to predict a Fed cut.  It seems that the surprisingly high first quarter GDP number and continued healthy labor data influenced the Fed to hold steady.

REFERENCES:

U.S. LABOR MARKET KEEPS HUMMING:  https://www.cnbc.com/2019/05/03/nonfarm-payrolls-april-2019.html; https://www.calculatedriskblog.com/2019/05/april-employment-report-263000-jobs.html
FED HOLDS THE LINE: https://www.marketwatch.com/story/fed-sticks-with-patient-policy-notes-weaker-core-inflation-2019-05-01
GRINDING HIGHER: https://www.wsj.com/articles/global-stocks-pause-ahead-of-u-s-jobs-data-11556871058?mod=searchresults&page=1&pos=3
U.S. LABOR PRODUCTIVITY IMPROVING:https://www.wsj.com/articles/u-s-worker-productivity-advances-at-best-rate-since-2010-11556800550