Job Market Isn’t Falling Apart

The stock market surged on the latest Employment Situation Report (see below). Currently, the Dow is up 360 points and the S&P 500 is up 1.3%. Bonds, except for junk corporates, are selling off.

Job growth may be slowing, but the labor market remains strong. The US economy generated 253,000 new jobs in April, which is considerably higher than expected. However, March payrolls were revised sharply lower to about 165,000. The unemployment rate ticked down to 3.4%, the lowest in 50 years. The under-employment rate—including those working part-time because they’re unable to find a full-time position—fell back to 6.6%. Wage growth edged higher as well. Average hourly earnings grew 4.4% from a year ago. So what’s the bottom line? Bloomberg News says, “Anyone looking for signs of an imminent downturn for the US economy won’t find it in the latest employment data.”

According to Zillow, the cost to rent a house in California has begun to fall. Yes, the rental market is now deflating. The national average rental price is still 5.3% higher than a year ago, but that rate of growth is clearly in freefall. You may remember that in early 2022 rent inflation was over 16%! Anyway, I bring this up because Zillow’s data is fresh, whereas rent data used in government inflation indices are very lagged. While Zillow’s Observed Rent Index peaked a year ago, the government data looks to be peaking now, which means it is misleading at best. Inflation is lower than advertised.

Apple (AAPL) reported first quarter sales, profits, and profit margins that exceeded Wall Street forecasts. The stock is up nearly 5% this morning. Revenue growth has slowed over the past couple of quarters, but I get the sense that investors are impressed with how management has navigated a very tough operating environment. In addition, the stock is generally viewed as a safe haven in a volatile market.