How the stock market reacted to the April hiring letdown

Today the nonfarm payrolls were released, and the figures fell below the expectation. Only 266,000 new jobs were added against the 1 million projections. Further, the unemployment rate rose from March’s 6% to 6.1%, said the Labor Department.

Dow Jones had an optimistic figure of 1 million additional jobs and a 5.8% unemployment rate. However, Friday’s report a huge letdown considering that some employers complain of a shortage of workers.

On the other hand, the markets reacted differently to the bad news. This is a sign that investors are optimistic that the Federal Reserve will continue with the ultra-easy policies. They also believe that April’s disappointing numbers are just a temporary phenomenon.

Further, some employers are reporting of shortage of labor supply besides the high job opening. That means there are a lot of jobs than available workers.

The leisure and hospitality industry was severely affected by Covid-19 restrictions put in place to reduce the infections. However, in April, the sector added 331,000 new jobs, which is a good step towards the nearly 2.9 million jobs prior to the Covid-19 era.  

Other services industry added 44,000 jobs, especially from repair and maintenance, together with personal and laundry services. Other gains were reported by local government education due to the resumption of in-school learning, social assistance, and financial activities.

Sectors that recorded drops are professional and business services which fell by 111,000 because temporary help services, messengers, courier services, and manufacturing declined.

Investors are optimistic that businesses are going back to operation, and the hiring pace will improve due to the relaxed Covid-related restrictions, declining infection cases, and hospitalizations due to the widespread vaccine distribution. The nation is vaccinating over 2 million every day, and this trend is expected to remain strong.

It’s also anticipated that the pace of hiring will improve into the summer, as was shown by declining jobless claims, which fell below 500,000.

The present increased spending is driven by the government stimulus efforts, which is strengthening the retail, manufacturing, and housing market. The reduced jobs reports will motivate Federal Reserve to continue with the easy money policies, thus stimulate asset prices. Fed has been injecting liquidity when the stock fall, thus raising their prices and other assets. This began during March 2009 low and was repeated in March 2020.

Because of these factors, NASDAQ futures rallied by more than 1.5% despite the weak jobs report. It’s expected that Wall Street will continue recording high prices, and the optimism of the economy roaring back to life will continue into the future.

Both the Dow Jones Industrial Average and S&P 500 had dropped during the pre-market trading but rebounded after the announcement.

Therefore the Federal Reserve policy, the infrastructure, and jobs plan bills that Congress is pushing will continue for some months because the US economy has a long way into recovery.