Labor Market remains resilient (for both the US and Canada)

• Hot US NFP report shows 253,000 jobs created in April, prior months massively revised down
• Robust Canadian employment data doubles forecast
• Banking worries ease as Regional bank stocks rebound

US stocks extended gains after the US nonfarm payroll report showed the labor market remains resilient. Stocks were off to a good start after decent results from Apple and as the regional banks rebounded after getting a nice upgrade from JPMorgan and as some banks/brokerages continue to show deposits are stabilizing. ​ The pressure on the regional banks appears to got out of hand and some traders are fearful that we could eventually see a ban on short-selling. ​ Europe does it so it doesn’t seem farfetched for a short-selling ban to get implemented considering all the additional stress that is putting on the economy.

US Data

The US economy added 253,000 jobs in April, much more than the 185,000 eyed by economists and close to the highest estimate of 270,000. Wages came in hotter across the board and that is bad news for the Fed. ​ The unemployment rate is heading in the wrong direction, ticking lower to 3.4%, most economists expected it to rise to 3.6%. ​ The Fed wants to see more labor softness to support the disinflation process. ​ ​

The headline numbers of robust growth, hot wages, and a falling unemployment rate made this report initially seem super hot, but when you read the entire report you also see large revisions and an unusually large net additions of firms. The prior two reports saw a downward revision of 149,000 jobs and net birth-death of business was huge, posting a 378,000 increase. This was a solid NFP report but the trend is still there for more the labor market to soften, especially considering the weakness seen in the private service sector. ​

Canada

North America had a tremendous jobs day. ​ The US economy got most of the attention, but Canada’s payroll report was rather impressive and delays calls for an imminent slowdown. ​ Canadian employment rose by 41,400, more than the consensus estimate of 20,000, and improvement from the 34,700-prior reading. ​ This marks the fifth straight labor market report that beat analysts expectations. ​ The labor market remains in job growth mode, sending the unemployment rate a tick lower to 5.0%.

The Canadian dollar rallied against the dollar as Canada’s job reading was robust and a cleaner read than the US NFP report.

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