Morning Report: Another strong jobs report

Posted on May 5, 2023 by Brent Nyitray

Vital Statistics:

Stocks are higher after the jobs report. Bonds and MBS are down.

The economy added 253,000 jobs in April, which came in above the 173k estimate. The unemployment rate fell to 3.4%, while average hourly earnings rose 4.4%. The labor force participation rate was unchanged at 62.6% and the employment-population ratio was unchanged at 60.4%.

Overall, this report shows that the Fed’s tightening policy has yet to slow down the labor market much. That said, average hourly earnings and the CPI are trending downward.

Those hoping for the Fed to cut rates in response to the regional banking situation might be disappointed. Former Fed Governor Randy Krozner put it succinctly: The Fed won’t quit until the labor market quits.

The regional banks got slammed again yesterday, with PacWest down another 50% and Western Alliance down 38%. There was a piece in the Financial Times about Western Alliance supposedly exploring strategical alternatives, which the company denied. Given the strong liquidity of some of these banks, the rout in the regional banks seem to be overdone. The regional banks are up pre-market.

The Biden Administration is closely watching the situation in the regional banks looking for evidence of market manipulation by short-sellers. SEC Chairman Gary Gensler put out a statement saying: “As I’ve said, in times of increased volatility and uncertainty, the SEC is particularly focused on identifying and prosecuting any form of misconduct that might threaten investors, capital formation, or the markets more broadly.”

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