The US Department of Labor reported this morning that the economy added 223,000 jobs in April, while the unemployment rate ticked down to a seven-year low of 5.4%; both numbers came roughly in line with consensus of 228,000 and 5.4%, respectively.
The surge in payrolls is crucial, as it erases concerns that the uninspiring 85,000 figure reported for March is evidence of a sustained trend. Over the last three months, job gains have averaged 191,000.
Employment increased in professional and business services (+62,000), health care (+45,000), and construction (+45,000) in April, while employment in the mining sector continued to decline (-15,000). The labor force participation rate also increased slightly to 62.8% from 62.7% the prior month; it has been stuck between 62.7% and 62.9% since April 2014.
Although the report was generally in line with expectations, the market seems to digest the news positively, with both the S&P and Dow sharply higher this morning. With the strong improvement month on month, we believe our retail and restaurant names -- Starbucks (SBUX:Nasdaq), Panera (PNRA:Nasdaq), WhiteWave Foods (WWAV:NYSE), lululemon (LULU:Nasdaq) and Target (TGT:NYSE) -- should benefit the most.
Finally, if the Fed views this report as an indicator for continued economic expansion, our financial positions -- Wells Fargo (WFC:NYSE) and Morgan Stanley (MS:NYSE) -- could also see improvement with the expectation of rising rates.