This morning’s Non-farm Payroll report showed an increase of 244k jobs in April, well ahead of the market consensus estimate of a 185k gain. March’s previous payroll estimate was revised up from 216k to 221k. Private payrolls grew by 268k, beating estimates of a 200k gain and manufacturing jobs rose by 29k, also ahead of the street estimate of a 20k gain. Certainly good news, but still an anemic recovery considering we need 150k per month to keep pace with population growth and a whole lot more than that to chip away at the millions of lost jobs over the last few years.
Under the covers we see that the job gains reported in April were the largest since February 2006, and a welcome sign as the pace of job creation needs to grow rapidly to compensate for the growth in the labor force and make a meaningful improvement in the unemployment rate. The report indicates that the manufacturing sector continues to rebound, with a 29k increase in April, retail sector up 57k, business services (51k) and education/health (49k). One major concern is that The labor force participation stalled at 64% and perhaps the real story that U6 increased from 15.7% in March to 15.9% in April.
In the bigger picture, the recent market sell-off is simply a cry for help with the market screaming to Bernanke, “Can you hear me now, Ben? Just like it did last year after QE1 ended, the market is screaming to the Fed to keep the stimulus coming. Clearly, QE Mini-Me is not enough, and they want a QE3. This bull market has been entirely Fed stimulus induced, and without it, we are in for a bigger sell-off and, if he’s not careful, a complete bursting of the bubble. Today’s unemployment eases the urgency but it will prove temporary at most. The economy is clearly weakening, as you can see with interest rates falling and the dollar rising. The nation is desperately trying to deleverage but the Fed is fighting it with everything they’ve got.
It is unlikely that Bernanke is ready to throw in the towel and declare the Quantative Easing programs a failure, (and accept fiscal responsibility), so I expect a full scale QE to be announced sometime soon. As you know, I have been touting that there would be a QE 3 for a long while now and I realize I have been very alone on this, but there is little choice. Without it, stocks are in trouble. We are not a nation to accept austerity measures peacefully.
Regards – Keith