Unemployment Falls to Lowest Level in 50 Years But Still No Sign of Wage Inflation

 

“JOBS, JOBS, JOBS!” The US economy added 263,000 jobs in April, well ahead of expectations. The strong number was also reflected in the unemployment rate which dropped to  3.6%, the lowest level in 50 years. President Trump celebrated the report by tweeting “JOBS, JOBS, JOBS!” as Vice President Pence joined the chorus of administration officials calling for a rate cut. Despite the strong headline numbers, wage inflation remained low, hourly earning rising at a 3.2% annual rate. Rates jumped up initially but pulled back and eventually went negative on the day- the 10 year yield falling to 2.53%.

 

 

Trump administration escalates public feud with Fed. VP Pence and Larry Kudlow echoed President Trump’s stance that “this is exactly the time not only to not raise interest rates, but we ought to consider cutting them” in a CNBC interview. Fed Vice Chair Richard Clarida countered by reiterating the US central bank’s wait-and-see approach, citing the necessity for dependency on economic data. Both sides will have better insight into the health of the economy when consumer price inflation data is released next Friday- median forecasts point towards a 2.1% YoY rise in core CPI.

 

 

US equities bounce back from two days of losses. Equities took comfort from the strong jobs report, the S&P 500 and Dow Jones Industrial Average rising 0.96% and 0.75% respectively. All of the S&P sectors were higher today with consumer discretionary and industrial stocks leading the way. 50% of the S&P 500 has reported first quarter earnings thus far, with 75% of them beating estimates.