The Buzz on Business for May 6th 2024

Friday’s employment report came in well below expectations. We’ll get into the details in just a minute but the stock and bond markets celebrated with a strong rally, because the bad employment news helps make the case for rate cuts, which, if and when they come, will support prices, at least in the very short term.

But what about all the other time-horizons? What are we to make of this in economic terms?

On Wednesday, Fed Chairman Jerome Powell, dismissed the notion that the economy was entering, or was in danger of entering, a period of “stagflation,” stating, “I see neither the “stag” nor the “flation.”

Well, forgive us Chairman Powell, unemployment and inflation may not be high but neither are they low, especially inflation. And the trends, it seems to us, have been pointing in the wrong directions.

For example, one year ago, in March of 2023, the economy created 504,000 new jobs, which was well above expectations. In March of this year, the month covered in Friday’s report, only 175,000 jobs were created which was well below expectations. We see similar trends in other labor market and economic statistics.

In October of last year, the Consumer Price Index increased by 0.10%. Since then inflation has increased every month and in March stood at 0.4%.

Stagflation isn’t an economic switch that’s thrown. It’s never vibrant, healthy economy in the morning, stagflation after lunch. There is a process, a series, a trend, in the economic data that gets us from wherever we are to a period of high unemployment and high inflation. The fact that you see neither the “stag” nor the “flation” doesn’t mean it’s not coming. Only in retrospect does that trend appear obvious.

Stock Market Report

Stocks gapped up at the open higher in light of the weaker jobs report, and finished the day and week with solid gains albiet on softer than average volume.

• The Dow Jones Industrial average was up 450 points on Friday. That's a gain of 1.2%, and it closed at 38,676.
• The S&P 500 was up. 1.3 percent, 64 points and it closed at 5,128.
• The tech heavy NASDAQ Composite had a great day. It was up 2%, a bit over 315 points and starts the week at 16,156.
• The Russell 2000 was up 1%. 20 points. And closed at 2,036.

Bond Market Report

Rates were down across the board on Friday, as you might expect in the face of the weaker jobs report.

• The yield on the  2-year treasury closed at 4.806%. That's off seven basis points. Recall the 2-year closed well above 5% as recently as Tuesday.
• The 20-year was also off seven ticks and it starts the week at 4.752%.

Oil, Gold, and Bitcoin

• Oil continued its rather steep decline on Friday. It was off $1.09 and closed at $77.93.
• Likewise, gold. It was off $2.20 and a troy ounce now changes hands at $2,310.20.
• Bitcoin broke the trend. It closed back above $60,000 at $62,157.48, that’s a gain of $2,714.88.

The Jobs Report

Friday’s job report is hardly an end of the world scenario, but it wasn't good. All of the numbers that make up the jobs report complex came in below expectations.

Average hourly earnings increased at 0.2% in March, they were expected to have increased by 0.3%.

The economy created 175,000 new jobs created in April but was expected to have created 238,000. It had created, 315,000 in March.

All of that. Increase the unemployment rate to 3.9% from an expected 3.8%.

To be clear a 3.9% unemployment rate is still pretty good. 175,000 new jobs is better than job losses.

And of course a somewhat weaker than expected labor market makes the Feds job fighting inflation a bit easier. Easier, unless, of course, inflation ticks up. In which case the job becomes infinitely more difficult. Perhaps impossible.

Slow Week for Economic & Earnings Reports

We don't get any new inflation data until a week from this coming Friday. Indeed, not much at all on the economic calendar this week.

Likewise, the earnings calendar slows down just a bit in the coming week. We do get Berkshire Hathaway and Disney as well as Uber and Airbnb. But nothing that is likely to move the markets one way or the other.

Nevertheless, we will be watching all of it very carefully and pawing through all of the tea leaves to see what it all means so we can report all of it to you here on the Buzz.