US Financial Markets Edge Higher as Payrolls Rebound, Unemployment Rate Falls to Decade Low

Headlining the jobs report released by the Labor Department this morning, nonfarm payrolls rebounded strongly in April with a 211,000 increase.  The figure easily surpassed expectations of +190,000 and is well above the 2017 first quarter monthly average of +176,000.  The largest tallies of employment additions were recorded in the service sector, as leisure and hospitality payrolls jumped by 55,000 while education and health services gained 41,000 jobs.  The unemployment rate unexpectedly fell to 4.4%, its lowest level since May 2007, compared to economists’ projection of 4.6%.  The tightening of the labor market was further evidenced by a reduction in the pool of available workers from 13 million to 12.8 million along with the labor participation rate edging 0.1% lower to 62.9%.  The slimming labor market slack was not fully realized in wage growth, however, as average hourly earnings rose a modest 0.3% for the month, lowering the year-on year rate gain to 2.5%.  Overall, today’s employment report supports the Fed’s remarks from earlier this week, characterizing the weak Q1 economic activity as “transitory”.  

US financial markets had a tempered reaction to today’s jobs report, with most risk assets trading near unchanged for the session.  Treasury yields/swap rates are marginally lower on the day, and the yield on the 10-year note looks poised to finish the week near 2.35%.  All three major US stock indices are currently up 0.1%-0.2%, helped in part by a 1.3% rebound in oil prices which boosted energy stocks.  WTI crude futures increased to above $46.25/barrel after falling below $44/barrel earlier this week.  The US dollar fell 0.1% against major currencies as the euro notched a fourth straight week of gains ahead of France’s presidential election this Sunday.  Centrist Emmanuel Macron holds a 20-point lead heading into the vote, generating a cautiously optimistic tone across global markets.