How in heck can interest rates be down on a very strong payroll number?
Sure, there's been more strife in the Ukraine, but the idea that we are at 2.5% on the 10-year, with rates down again is pretty amazing. We did create jobs not lose jobs didn't we? How in heck can 288,000 people be hired in a month, 60,000 more than we thought, and there not be at least a bump up in rates? Or one that at least lasts more than mid-morning when rates plunged dramatically.
Now, I am sure that there will be people who say "it is hollow job growth," because while the unemployment rates fell to 6.3% from 6.7%, the labor force shrank by more than 800,000 and the participation rate decreased to 62.8%, down from 63.2%, the lowest in 36 years. Average hourly earnings are stagnant. The average hourly workweek stayed at 33.7 hours, not that strong.
But still there were jobs created all over the place. The report was great news. The 288,000 is so much stronger than the average of 190,000 per month over the last year. The professional and business services created 75,000 jobs in April. Those are white collar jobs, typically high paying, that were being created at about 55,000 a month, so this is a true step up.
Construction, which had been severely constrained from the weather, seems to have regained momentum with 32,000 jobs created. The auto industry put 6,000 to work and the retail trade employment rose nicely vs. previous comparisons.
All of this is terrific news. But it is, alas, conforming to what I had believe to be the case, which is that the weather was a real, not made up, issue. The weather for all three months really did play havoc with much of the country and while it can easily be said that it didn't matter because a couple of operators put up fabulous numbers -- namely Chipotle (CMG) and Rite Aid (RAD) -- I think the truth is that the country's business truly took a hit and that we are catching up for what was lost and then some.
Yes, if you are in retail you are not going to hire for the days you missed. But you also may have held off hiring because you aren't feeling too flush to hire. I know this first hand. Fortunately, I own a restaurant that has allowed me to learn more about small business than just about anything I have ever done. Our business dropped to nil on many days because of the weather. But we still had to pay people. The last thing I wanted was to hire more people, even as on the days when it was sunny out we could barely meet demand.
Now that the weather is better, it's time to go on a spree. It is obvious I am not alone. If only the price of skirt steak, limes and avocado would come down (yes, the Guacpocalypse is still very much with me and I don't think we can get away with raising prices right now). Talk about another common problem with restaurants.
But ultimately there is good, balanced growth flowing through the whole economy. It should move up rates eventually, even if the Ukraine and a fear of a war-flight-to-safety bid is holding them down. If not, it is time for the Federal Reserve not only to stop buying bonds, but to start selling them. Yes, the high-quality bond shortage is that acute and the inability of fixed-income people to earn enough risk-free money to make ends meet in a rising food price environment almost demands that the Fed become a seller.
The economy's good enough. It's time for the Fed to change policy. It would be good for bond holders, stock holders and the balance sheet of the institution that's done the most to get this economy back on track.
Fed, take a victory lap and ring the register. Well done!