The all-important jobs report was released this morning, and I have to say nonfarm payrolls were relatively weak for the month of April. While the unemployment rate fell to an 18-month low of 3.9%, that was on the back of just 164,000 new jobs created, which was below expectations of 193,000.

Labor shortages may start feeding into higher wage growth as employers offer incentives to attract talent. For example, Burlington Northern is offering up to $25,000 for hourly electricians, boilermakers and pipefitters.

Surprisingly, average hourly earnings increased only 0.1% month-over-month and 2.6% year-over-year. This was also below expectations for gains of 0.02% and 2.7%, respectively. Still, March numbers were revised higher from 103,000 to 135,000.

The unemployment rate dropping below 4% for the first time since 2000 came in part to a decline in the labor force participation rate to 62.8%. Furthermore, the black unemployment rate was 6.6%, the lowest since the report began tracking this metric in 1972.

Jobs gains were seen in professional and business services, as well as manufacturing, healthcare and mining:

  • Professional and business services: +54,000
  • Manufacturing: +24,000
  • Healthcare: +24,000
  • Mining: +8,000

The U6 number – what some call the real unemployment rate – dropped to 7.8%, its lowest level since 2001. With the tightening labor shortage, this group could represent a pool for additional labor as discouraged workers return to work.

The market opened the day lower as the U.S. dollar sold off and traders priced in a slower rise in interest rates, but things turned around following comments from President Trump on China and trade deals. Not only did his words spark a rally, but his take on the stock market helped set the tone for the day:

“The stock market is up 35% since the election and now I think they’re waiting to see what will happen with trade. We are going to have some incredible trade deals announced. My people are coming back right now from China and we will be doing something one way or the other with respect to what’s happening in China.”

I had said previously on television that Trump’s comments on China and trade would be key to moving this market, and we’re seeing that firsthand today. The indices are putting together nice rallies to close this first week of May, and while you may hear some folks talking about “sell in May and go away” that definitely won’t be us. We’re here for the long haul.