Forexlive Americas FX news wrap 5 May. US jobs report continued to show some slowing

It was Unemployment Day and data was mixed despite a higher than expected gain of 253K for the current week. The gain for the month was comfortably above the 180k estimate.

However, job growth slowed after including the revised figures for the February and March figures. Those revisions reduced the two months by 149k, bringing the average monthly job gain over the past three months to 222k, compared to 524k a year ago. The average is the lowest since January 2021.

On the strong side was the unemployment rate, which fell to 3.4% from 3.5%, matching a multi-decade low, while average hourly earnings rose more than expected, up 4.4% from a year earlier and 0.5% from the previous month (vs. 0.3% estimate). Higher labor costs can lead to inflationary pressures and obviously the unemployment rate at its lowest levels in several decades also has the potential to drive up inflation if those costs are passed on to the consumer.

Dig deeper into the main employment sectors:

• Professional and Business Services: Employment in this sector continued its upward trend, adding 43,000 jobs in April. Professional, scientific, and technical services saw an increase of 45,000 jobs, while temporary assistance services continued to decline, with a loss of 23,000 jobs.

• Healthcare: The sector added 40,000 jobs in April, with hiring increasing in ambulatory healthcare services (+24,000), healthcare and residential facilities (+9,000), and hospitals (+7,000).

• Leisure and Hospitality: Employment in this sector continued to rise, adding 31,000 jobs in April, mainly in food services and drinking venues (+25,000).

• Social assistance: The sector added 25,000 jobs in April, with individual and family services contributing 21,000 jobs.

• Financial activities: Employment increased by 23,000 in April, with gains in insurance companies and related activities (+15,000) and real estate (+9,000).

• Government: Employment continued its upward trend, adding 23,000 jobs in April.

• Mining, quarrying, and oil and gas extraction: The sector added 6,000 jobs in April, mainly in mining support activities.

Employment in other major industries, such as construction (+15K), manufacturing (+11K), wholesale and retail trade, transportation and warehousing (-2.2K), information (+1K), and other services (+0.5K), remained largely unchanged. in April. Goods producing jobs added 33k vs -17k last month, while services added 197k vs -140k last month

Job growth needs to moderate more for the Fed to stop worrying about inflation problems. The central bank has indicated that it will likely hold off on raising interest rates when it meets next month, providing some breathing space to assess the progress of the labor market. Despite the challenges stemming from the Fed’s rate hike campaign and turmoil in the banking sector, hopes remain for a smooth transition of the labor market to pre-pandemic standards.

St. Louis Federal Reserve Bank President James Bullard was the first Fed member since the Fed raised interest rates by 25 basis points on Wednesday and published the US jobs report to speak. Pollard is more of a hawk, but he’s loosened up a bit lately.

Bullard thinks the recent quarter-point rate hike is a good move, moving the Fed above 5%, but he concedes there is still plenty of inflation in the economy. He does not see stagnation as an underlying condition, but rather a slowdown in growth and declining inflation. With today’s stronger-than-expected jobs report, Bullard indicates that the job market is tight and will take time to cool down. He believes that regional banks will do well despite some problems, and that the Fed can still achieve a soft landing. The recent decline in market interest rates may overshadow the impact of credit tightening from pressure from banks, but Bullard believes its final impact on the economy will be small. He warns that Wall Street may be unprepared if inflation persists and that the Fed should do more with regard to rates. The current policy is at the lower end of restrictive territory, and Bullard suggests that the Fed may have to “raise rates” due to a slower decline in inflation. He remains data-driven and open-minded about the June meeting, calling the latest jobs report “impressive” but highlighting that there is still a long way to go to balance the labor market.

The comment that he remains confident of a soft landing caught the stock market’s attention and helped extend gains toward new extremes. The Dow Jones had its biggest day since early January. The Nasdaq closed within a few points of its highest level since 2023. The S&P posted its fourth largest percentage gain for the year. All 3 indicators cut 4-day losing streaks to start May:

Final numbers appear:

• The Dow Jones Industrial Average rose 546.64 points, or 1.65%. For the trading week, the index is down -1.24%.
• The Standard & Poor’s Index rose 75.03 points, or 1.85%. For the week, the index fell -0.80%.
• The Nasdaq rose 269 points, or 2.25%. The index rose for the week by 0.07%.

in other markets

• Gold fell -$33.95, or -1.66%, in 2015.94. Gold rose during the trading week by 1.32% despite today’s sharp declines as it reacted to bank concerns and lower interest rates earlier this week. Today, the stock prices of regional banks and US interest rates have risen.
• Silver fell -$0.37, or -1.43%, to $25.64. Silver is up 2.42% this week.
• WTI Crude Oil rose $2.76, or 4.03%, to $71.32. Crude Oil fell -7.09% on global growth concerns despite today’s sharp rally. Yesterday, the price fell to its lowest level since December 2, 2021, when it reached $63.65, but quickly bounced back.
• Bitcoin is marginally higher at $29,541.

In today’s forex market, the Australian dollar ends up as the strongest followed by the Canadian dollar. Both were fueled by risk sentiment. The Swiss Franc and the Yen were the weakest, as the trend fell to the relative safety of those currencies.