Employment Situation Report Shows BIG Move Higher

The Employment Situation report was mixed leaving traders scrambling to various sources to explain what the data means. However, one thing is clear, April was a big improvement over March.

The upshot is that the jobs report was strong enough to calm fears of a coming recession, without it being too strong to suggest the Fed will raise rates sooner than September.Source: www.fortune.com

Nonfarm payroll growth came in a soft 223,000. March was revised down from 126,000 to 85,000. Nevertheless, the unemployment rate fell to 5.4 percent from 5.5 percent, led by a rise in those finding jobs.

The construction sector showed a 45,000 increase. Professional business services added 62,000 jobs with temporary services up 16,000 for its best gain of the year. Gains in temporary services often lead permanent hiring higher.

The Employment Situation report showed a huge move higher from the previous (revised) low in March of 85,000:

I blasted Janet Yellen and the Federal Reserve last month on this report that clearly showed a worsening situation; however, this month that is not the case. We have a big move higher this month, something we did not have last month. The key level to watch is February’s 266,000 number. The Employment Situation report for May needs to break above 266K to bust the lower highs, and lower lows, and end the downtrend that began in payroll growth in November 2014.

It’s a bit of a relief; you see a nice bounce-off from March… Today we got a sign that we are getting a little bit of a bounce-back but it was far from a robust number.www.forbes.com

The big question is: does the Employment Situation report for April support the Federal Reserve’s thesis that the slowdown in Q1 2015 was just transitory and the economy will improve in later 2015? The report was mixed but I think we need to demand more than just April’s bounce to answer that question. One month does not a market make. What we can say is that the Employment Situation report is better than last month and while it may be short of supporting the Fed’s thesis, it does not disprove the Fed’s thesis either. Think about it. This report could have been a disaster had it showed April was even lower than March’s 85,000. HOWEVER watch out for next month’s revision to April!

US Jobless Claims Stay Below 267K

New jobless claims came in at a 265,000 in the May 2nd week! Wow, that was way below the 280,000 consensus estimate. Does this suggest that tomorrows all important Employment Situation report for April 2014 is going to rock? Maybe.

From a chartist point of view, I find it significant that the new jobless claims number stayed below the 267K set back in January and April 2015. In a downtrend, previous support becomes resistance and that may be what we are seeing.

Below is an updated interactive infographic for the U.S. Jobless Claims report. Hover your mouse over the line to see the underlying data:

Traders use jobless claims to gauge the strength of the job market. The fewer people filing for unemployment benefits, the more that have jobs. Most jobs come with an income that gives a household spending power. Consumer spending powers the economy higher, so a stronger job market generates a healthier economy. Consumer spending makes up an estimated 70% of GDP.

Consumer Spending Forms V Pattern

The consumer spending (nominal) component of the Personal Income & Outlays report released today shows a classic ‘V’ continuation pattern.

March consumer spending rebounded 0.4 percent (and was up 3.0 percent from a year ago) from a revised increase of 0.2 percent in February. Yeah, the perma-Bears like Peter Schiff got smoked on the upward revision in February to 0.2 percent. That was a big upward revision from 0.1 percent. That means consumer spending rose double in February from what was originally reported at the end of March.

Check out the textbook ‘V’ continuation pattern in consumer spending:

The big resistance level to watch now is at 0.4 percent. My money is on the Federal Reserve being right about the U.S. economy picking up in Q2 and Q3 and so we should get a break above the 0.4 percent resistance level over the coming months. Who knows, if the revised March number is anything like what happened with February being revised up to 0.2 percent, we could have already broken through this level.

Consumer spending generates more than two thirds of GDP and is a key driver of growth.

Jobless Claims Break Support Hit 15 Year Low!

I usually do not write an article about the volatile weekly jobless claims report but folks, a major chart support was broke with today’s report.

New claims for state unemployment benefits fell 34,000 to a seasonally adjusted 262,000 for the week ended April 25, 2015, the lowest reading since April 2000! The number of Americans filing new claims for jobless benefits tumbled to a 15-year low.

Jobless claims has been in a sideways trading channel for all of 2015. Today’s plunge broke below support and continues the strong downtrend that began in January 2014.

I created the interactive infographic below that shows jobless claims in 2015. Hover your mouse over the line to see the specific data.

The major 267K support that has held for all of 2015 has been broke. More conservative traders may want to wait a couple more weeks to get confirmation of the break.