This week, the stock market sloshed around as we received a handful of mixed economic reports. These data have a real impact on our portfolios, so let’s review what’s going on with the economy right now:
The biggest news was the May payroll report. On Friday, the Labor Department announced that just 38,000 new jobs were created last month. This was well below economists’ expectations of 158,000 jobs. In fact, May was the weakest month for job creation in five and a half years.
Ironically, the unemployment rate fell from 5.0% in April to 4.7% in April. However, that’s only because the workforce shrank by 458,000, pushing the labor force participation rate down to 62.6%. The other bad news was that the previous two months’ payrolls were revised lower by 59,000 jobs. With the exception of the healthcare sector, job growth has been soft across all industries.
Separately, Automatic Data Processing (ADP) reported that 173,000 private sector jobs were created last month. This was better than the forecast of 165,000 jobs. Additionally, April’s payrolls were revised higher by 9,000 to 165,000. While these revisions are encouraging, I expect the Fed to focus more on the Labor Department’s payroll report.
In other news, the Commerce Department announced that the trade gap widened by 5.3% to $37.4 billion. In April, imports jumped 2.1% while exports climbed 1.5%. While the trade deficit was lower than the consensus estimate of $41.3 billion, it is still on the high side. This is significant because a wider trade gap drags down overall economic growth.
I’d also like to point out the Conference Board’s consumer confidence index, which fell from 94.7 in April to 92.6 in May. This was shocking, because economists were expecting consumer confidence to rise to 96. Apparently, consumers are becoming less confident about their present situations; the current conditions index fell from 117.1 to 112.9.
It’s likely that higher gasoline prices and housing costs are making consumers more cautious.
That’s all I have for you this week; I’ll be back on Monday with our weekly ratings changes.
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