Hirings at a Record High

A very positive big-picture look at the employment front: The total number of workers hired rose to a new high in April, according to Labor Department data released yesterday. But despite this, the amount of available jobs still vastly outnumbers unemployed workers.

Hirings increased to 5.9 million for the month, a gain of 240,000 from March, the Job Openings and Labor Turnover Survey indicated. The hiring rate rose to 3.9 percent, an increase of one-tenth of a percentage point. The total hirings was the most recorded in the data series’ history going back to December 2000.

Openings for the month actually decreased slightly, falling 25,000 to 7.45 million. However, workers that the Bureau of Labor Statistics classifies as unemployed declined by 387,000 to 5.82 million, leaving the gap at 1.63 million.

When Bad News Is Good

U.S. stocks closed higher Friday, following a weaker-than-expected jobs report, finishing off the best week of the year for both the S&P 500 and the Dow Jones industrial average. Why is that? The markets could be entering a period in which bad economic news is good for stock markets.

The hope is that data show a decelerating economy will force the Fed to cut interest rates. Lower interest rates are seen as good for stock prices, because they hold down bond yields, making equities a relatively more attractive investment.

For the week, the Dow gained 4.7 percent, the S&P 500 returned 4.4 percent, while the Nasdaq climbed 3.9 percent. The Dow and S&P 500 had their best weekly showing since late November, while it was the Nasdaq’s best performance since the week ended December 28.

May's Jobs Report

Employment slowed down in May, with the economy adding just 75,000 jobs, the Labor Department reported this morning. This was the second time in four months that payrolls increased by less than 100,000, although the headline unemployment figure remained at 3.6 percent.

In addition to the weak total for May, the previous two months’ reports saw substantial downward revisions. March’s count fell from 189,000 to 153,000 and the April total was taken down to 224,000 from 263,000, for a total reduction of 75,000 jobs. Employers have added 164,000 jobs per month on average in 2019, compared with 223,000 jobs per month last year.

Health care and professional and business services were the bright spots in May, and have added nearly 900,000 jobs over the past year. But construction, mining and manufacturing showed little change from April, and retail lost 7,600 jobs.

Oil in a Bear Market

Oil prices plunged on Wednesday, with futures falling to their lowest since January, after the U.S. government reported an unexpected surge in the nation’s crude stockpiles. U.S. West Texas Intermediate crude fell to $50.66 a barrel after the report, its lowest level since January 15.

That means that oil prices have officially entered a bear market, defined as a drop of 20 percent. Prices have settled 22 percent below the most recent high of $66.30 on April 23.

The reason for all this: U.S. commercial crude inventories jumped by 6.8 million barrels in the week through May 31, the U.S. Energy Information Administration reported, even though U.S. crude imports jumped by more than 1 million barrels per day. Meanwhile, weekly U.S. oil production ticked up to an all-time high 12.4 million barrels per day.

The New Direction for Interest Rates

Is the next step for the Federal Reserve an interest rate cut? Fed chair Jerome Powell said yesterday that the Fed was “closely monitoring” the impact of trade developments and would “act as appropriate” to sustain the economic expansion. That came after St. Louis Fed President James Bullard said the Fed may need to cut interest rates soon amid concerns about weak inflation and risks to economic growth.

The markets seemed to think this meant a potential cut in interest rates, and reacted accordingly. After a disastrous Monday, the Dow Jones Industrial Average and the S&P 500 both rose 1.8 percent yesterday, while the Nasdaq was up 2.2 percent.

The last time the Federal Reserve cut its benchmark Fed Funds rate was on December 17, 2008, shortly after the financial markets melted down. That was its tenth rate cut in just over a year, and brought the rate to near zero; the Fed wouldn’t raise rates again until December 2015.

Tough Times for the Giants

A rough day for three of America’s biggest companies yesterday, due to possible antitrust action:

• After a Reuters report saying the Justice Department is considering a probe of the company’s practices, Apple's market capitalization below the $800 billion mark for the first time in nearly four months. That leaves Apple in third place on the list of most valuable U.S. companies, behind Microsoft at $923.4 billion and Amazon.com at $835.3 billion.  
• Facebook shares fell as much as 8 percent following a Wall Street Journal report that said the FTC will be able to examine the effect of Facebook’s practices on digital competition. Facebook’s drop shaved more than $40 billion from its market cap, bringing it to about $463 billion.
• Alphabet shares slipped after a report said the Justice Department is readying an antitrust investigation against its prime subsidiary, Google. Alphabet shares dropped 6.7 percent on  the day.

GDP Slows Down a Bit

The U.S. grew a bit slower in the first three months of 2019 than originally reported, mostly because of weaker business investment, the Commerce Department reported. Gross domestic product grew at a 3.1 percent annual pace in the first quarter, down slightly from an initial 3.2 percent estimate.

Most worryingly, corporate profits also fell for the second quarter in a row in a negative sign for the economy. Adjusted corporate profits before taxes fell at annual 2.8 percent pace, the biggest quarterly decline for that measure since 2015.

Consumer spending rose a mild 1.3 percent, held down by reduced purchases of durable or long-lasting goods such as autos or appliances. But spending on durable goods sank 4.6 percent, marking the biggest drop for that category in 10 years.