Here’s a sure sign that expectations have shifted after the Great Recession: the collective sigh of relief from economists and investors after the Labor Department said the US economy created a better than expected 165,000 jobs in April and the unemployment rate edged down to 7.5 percent, the lowest level since December 2008. These results are nothing too special. After all, 165,000 matches the average monthly job growth that has occurred over the past three years and 7.5 percent unemployment is still incredibly high. But nearly four years after the end of a once-in-a-generation recession and financial melt down, those numbers were just what was needed to soothe “spring economic slow-down” anxieties.
The internals of the report also helped to buoy sentiment: the positive revisions to both the March and February numbers added an additional 114,000 jobs than were previously reported; and there was also progress for those who have been out of work for more than 6 months. The number of long-term unemployed fell by 258,000 to 4.4 million, down from the peak of 6.7 million. Sure, that number is high, but over the past 12 months, there has been a near 700,000-drop in the total. The long term unemployed is at 2.8 percent of the labor force, which is the lowest since May 2009.
So where do we stand in all of this? When an economy only grows by about 2 percent annually, it can only produce so many new jobs, which is why nonfarm payroll jobs are still 1.9 percent below where they were when the downturn began in December 2007. At the current pace of job creation, the economy should return to pre-recession in about 18 months, at which time the unemployment rate will probably drop to 6.5 percent. That’s progress, but it sure doesn’t seem like cause for a big celebration…
Markets: While the April jobs report is subject to revision, fears that a spring slowdown would stymie job growth have yet to turn into reality, which helped the bulls take control and push the Dow above 15,000 and the S&P 500 over 1600 for the first time ever.
Not to suck the life out of the party, but it took the Dow nearly six years (1,457 trading days) to cross 15,000 after it first topped 14,000 in July 2007. This is an especially long time when compared to the shortest time frame for a 1000-point move (23 days to rise from 10,000 to 11,000), which took place in 1999. Calendar watchers take note: Dow 15,000 occurred on the 14th anniversary of the first time it crossed 11,000 (May 3, 1999), which of course is as irrelevant as the number itself.
The S&P 500’s milestone took even longer: the broad index first crossed above 1500 in March 2000, which means that it’s taken 13 years, one month and 11 days for the index to jump a mere 100 points, the fourth biggest time span separating 100-points. The shortest time occurred in 1999, when it took the index 84 days to go from 1300 to 1400.
- DJIA: 14,973, up 1.8% on week, up 14.3% on year
- S&P 500: 1614, up 2% on week, up 13.2% on year
- NASDAQ: 3378, up 3% on week, up 11.9% on year
- June Crude Oil: $95.61, up 2.8% on week
- June Gold: $1464.20, up 0.7% on week
- AAA Nat'l average price for gallon of regular Gas: $3.52
THE WEEK AHEAD: Investors will have plenty of time to chew on the jobs data and the market highs, as the economic calendar will be light and earnings season will be winding down.
Walt Disney, Whole Foods
10:00 Job Openings and Labor Turnover survey (JOLTS)
3:00 Consumer Credit
Chain store sales
8:30 Weekly Claims
10:00 Wholesale inventories
G-7 Finance ministers and central bank governors meet in London
Ben Bernanke speech at Chicago Fed banking conference
2:00 Treasury Budget