A much less than expected drop in the non farm payrolls but the number remains bullish as it nears zero! The Non farm Payroll for the month of April showed a less than expected drop of only 20 thousand compared to the expected drop of 78K and the previous decline of 81,000 after it was revised from an originally reported fall of 80K. The monthly average hourly earnings fell to 0.1% from a previous 0.3% reading but the unemployment rate showed improvement as it crawled down slightly to 5.0%.
This just added more comfort to the markets as it is now widely anticipated that the cut witnessed earlier this week could be the last one! The labor market didn't hinder further this month but analysts still wait for the upcoming jobs reports before the next Fed meeting in June to help make things clearer.
Construction and manufacturing sectors continued to lay off workers which was logical since the housing sector has yet to find a bottom and the ISM manufacturing index showed the employee sub-index falling significantly to 45.4 from 49.2. Construction jobs shed 61,000 in April; falling a total of 457K jobs since its peak in September of 2006.
We saw the unemployment rate unexpectedly fall as the jobless rate dropped as more unemployed workers were able to find jobs the past month pushing employment up to 362,000 while unemployment dropped 189,000.
Looking at details of the report, factory payrolls dropped by 46K as the production of durable goods took a major toll on the sector. But the significant and quite ironic reading has to go to the Private sector jobs!! On Wednesday, the ADP said that private sector have added 10,000 jobs; however today we see that they have actually fell 11K! This just adds to the untrustworthy of the ADP reading since it hasn't been coming accordingly to the Jobs report.
Concerning the service-producing industries, they successfully provided the market with 90,000 jobs last month supported by health care, leisure, hospitality and professional services industries. Temporary-help jobs gained 39,000 jobs as well.
I can't say markets weren't relieved to see such a report as literally all markets were dancing from the joy! The dollar index rose 0.6% almost instantly as the federal currency gained against all majors but less powerful against the Sterling pound. Against the Euro it gained 0.5% and 1% against the Yen. The US stock market leaped as the Dow Jones industrial were up 103 points to reach 13,104 while the S&P500 rose 11.3 points and the Nasdaq composite up 15 points. As for US treasuries, it came as no surprise when it slid after the release of the report!
The effect wasn't limited there as European markets also celebrated! The cattle theory has proved to be right once again as we see the UK FTSE 100 rise 1.5%, German DAX jump 1.6% and the French CAC inclining 1.7%.
In a different report, the Commerce Department reported that its factory orders came showing a surprising gain of 1.4% opposing odds of a slight 0.2% rise and the previous revised reading to -0.9% from -1.3%.
The rise in the reading was supported by the large rise in nondurable goods orders as it gained 2.6% marking the largest rise since November. On the other hand, orders for durable goods rose only 0.1% in March but that wasn't surprising because new orders in the ISM showed that it was pretty much stable yesterday.
Excluding transportation, orders in the US would have risen by 2.2%. Despite the massive drop in defense capital goods as it fell 5.5%, it wasn't able to offset the positive readings in the other sectors. Orders for computers and electronics components inclined 0.9% while shipments rose 1.1% after falling 1.9% the previous month.
It's back ladies and gentlemen and if you don't know what I'm talking about then you're in the wrong business!! The return of the dollar, the return of the appetite, and the restoration of the confidence in the markets might be the drivers for normal markets once again. Carry trades have been dominating the markets since the morning since investors have been letting go of low-yielding assets and purchasing more risky assets specifically those with high returns. A round of applause dear reader as the dollar is stepping up to center stage!