April 2012 Jobs Number Disappoints As Expected, Unemployment Rate Dips To 8.1 Percent -What Is the Fed Predicting?
The job market in the U.S. isn’t improving. The economy added a meager 115,000 jobs in April which was much lower than consensus estimates of 170,000 jobs. Our forecast was for an increase of about 120,000 jobs and the Bureau of Labor Statistics, U.S. Department of Labor data released today was within our expected range.
On Sunday April 29, 2012 in the article “U.S. April 2012 Monthly Unemployment Report Could Be The Most Significant Data Point This Year So Far:” our prediction was clear.
“We believe it’s possible the lower range of 100,000 to 120,000 is more likely than some of the mid-range economic data predictions we’ve seen at 200,000 or more.”
Tory Capital, Goldman Sachs and ADP got it right – this jobs number easy to forecast. The U.S. non-farm payroll data shows the economy in struggle mode without a catalyst to pull it up by the bootstraps. After a disappointing March jobs report that showed an additional (unrevised) 120,000 jobs were added, today’s data confirms the U.S. economy is growing at a slightly slower pace than in the past few months.
Investors fled U.S. equities in favor of bonds after the employment number was released and stocks nosedived including $QQQ tech, $XLF, financials and $XHB homebuilders. The Fed is looking for market participants to assume more risk but this may not happen due to uncertainty related to monetary and fiscal policy. Unlike stock related data such as Apple’s first quarter earnings 2012 that consists of private information, the marginal unemployment reductions in the government data was expected due to the initial jobless claims released in March that was weak.
The Fed Is Adding To Uncertainty
The low jobs number released today may be causing some Fed watchers to wonder what data they are ‘forecasting’. The Fed is expected to use monetary policy at some point before the November 2012 elections and suggestions have already been floated that Chairmen Ben Bernanke may not get another term if the economy’s growth rate double dips. In the crisis that began in 2007, the Fed showed little proactive, predictive power as Bear Sterns, then Lehman followed by AIG faltered sending the economy in a tailspin while the crisis that was supposedly “contained” spun out of control.
A proactive Fed would get more risk averse investors back into the market and could help guide expectations in a much better way than just claiming to keep interest rates lower for 2 years which is beyond most market participants’ time horizons for making decisions. The weakness in China, Europe and now the U.S. suggests more action is necessary not only by the Fed but by fiscal policy makers also.