Today’s Non-Farm payroll (NFP) employment report gave a little something for everyone. With 223k net jobs created for the month of April, the number basically fell in line with the range of expectations. However last month’s report was revised down to 85k net jobs created, a 32% decrease from the initial 126k number originally reported.
The consensus all along has been that this recovery has been the slowest on record and much of the data seems to back up these claims. For instance, the average monthly net job gains during the last bull market in equities between October 2002 and October of 2007 was around 96,300. Whereas during this current bull market that began in March of 2009, the average monthly job gains comes in around 75,300. In fairness we were losing an average of almost 500,000 jobs a month in the year 2009 due to the financial crisis.
The unemployment rate hit a new low for this bull market cycle, at 5.4%. This is a good sign. There is also some signs of life in actual wage growth. However it may be too soon to tell if this is a beginning of a trend or not.
GDP growth is another factor in the slow recovery. If we once again compare the previous equity bull market from 2002-2007 with our current situation, we can see the difference. The 2002-2007 bull market came with an average GDP reading of 3.11%. While the current bull market off the 2009 lows shows an average GDP growth rate of 1.9%.
Of course there are other factors in the equation such as all time highs in revenue growth and corporate profits. Historically low interest rates around the world, to go along with historically easy monetary policy. And the seemingly low potential risk for a recession.
Today the markets are cheering the jobs news, but overall stocks have remained range bound since Thanksgiving and bond yields remain flat year to date. Making this a difficult environment for investors. Ironically the one asset class that seemingly everyone gave up on last year, International and Emerging market equities, are the ones that are carrying the torch this year. Sporting gains of 9-10%. This illustrates both the positive and negatives of being diversified.
The advance – decline line remains in a healthy uptrend which generally bodes well for future stock returns.