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NFP Instant Reaction: A Tubthumping Jobs Report

The iconic late ‘90s hit “Tubthumping” by the British punk band Chumbawamba was once voted #12 in Rolling Stone’s list of the 20 Most Annoying Songs. At one point, the song repeats the vapid lyric “I get knocked, but I get up again. You’re never gonna keep me down” seemingly a dozen times in a row. As much as we all wish we could permanently remove that song from our minds, its lyrics provide a good metaphor for today’s jobs report.

We all know that the US labor market got “knocked down” last month, but the today’s revisions showed that March was even worse than initially thought. From the initial disappointing 126k reading, the March NFP reading was revised down to a shockingly low level of just 85k! Just like Chumbawamba though, the US economy “got back up again” this month, with the April jobs report showing 223k net new jobs, roughly in-line with the anticipated 227k reading.

The secondary elements of the report were also generally solid: the unemployment rate ticked down 5.4%, even though the participation rate edged up to 62.8%, suggesting that the decline in the unemployment rate was driven by “good” factors (more employed workers, rather than workers dropping out of the labor force). The one blemish on the otherwise solid April figures was average hourly earnings, which only rose at a 0.1% rate month-over-month, missing expectations of a 0.2% rise.

Given the lack of a blowout bullish number this month, a June rate hike by the Fed is almost certainly off the table, and the central bank will likely need to see a more aggressive increase in wages over the next few months before entertaining a rate hike in September.

Market Reaction

So far, the overall market reaction has been fairly subdued, mirroring the roughly as-expected jobs report. The biggest move has been in US equities, with futures on the DJIA, S&P 500 and Nasdaq all trading 1% higher than yesterday’s close. US bond yields initially dropped but have since recovered, with the benchmark 10-year treasury bond trading down 3bps to 2.15% as of writing. As for the forex market, the dollar is trading a tick lower than pre-NFP levels, with EURUSD at 1.2160 and USDJPY at 119.80, though GBPUSD is essentially unchanged as traders continue to focus on the shocking results of last night’s UK election (see here and here for more election coverage).

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