June 7, 2019

A Dismal Employment Report Is Great For Stocks?

The number of non-farming new jobs was weak in May as employers added a mere 75,000 jobs.  Normally, you would think that this would be bad for the economy and thus usually bad for stocks.  But what it has done is bolster the Federal Reserve’s case for cutting interest rates as soon as this month, a possibility that has given a lift to markets in recent days.

The unemployment rate was unchanged at a 50-year low of 3.6%, the Labor Department reported.

Economists surveyed by Bloomberg expected 178,000 job gains.

Here’s a kicker: Payroll gains for March and April combined were revised down by a total 75,000. March’s additions were revised from 189,000 153,000, and April’s, from 263,200 24,000.

Why is this so important?  The May employment report was highly anticipated because of recent speculation that the Fed could cut its benchmark rate for the first time in a decade as soon as this month, especially if the economy softens. The jobs report typically provides the best real-time gauge of the labor market and economy.

about the author:

Mike Shorr

Since 1994, Michael has been an on-the-floor market maker, Vice-President of Interest Rate Derivatives for Knight Financial Products and Director of Education and Options Instructor at Trading Advantage. He makes the oftentimes complex world of options and trading accessible to the novice and advanced trader alike. Michael has a Bachelor of Science degree in Statistics and Finance from the University of Illinois Champaign-Urbana. He presently is Director, Trader Education at ProsperTradingAcademy.

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