Jobs Data Is ‘Good News’ That Raises Fed Stakes: Investors React

(Bloomberg) — Stronger-than-forecast March hiring pushed up U.S. stock futures on Friday and sowed optimism among investing professionals who said vaccines, easing lockdowns and ongoing government stimulus bode well for markets after the S&P 500 surged past 4,000. Several warned the pace of growth will eventually pressure the Federal Reserve, which has vowed years of near-zero rates.

“We were expecting a big number and today’s jobs report delivered in a major way,” said Eric Merlis, head of global markets trading at Citizens Bank. “It is the flip side of what we saw for March of last year and another clear sign that the U.S. economy is on a strong path to recovery.”

Nonfarm payrolls increased by 916,000 last month and February employment was revised up to a 468,000 gain, according to a Labor Department report Friday. The unemployment rate fell to 6%, as the workforce participation rate edged higher. June contracts on the S&P 500, trading in an abbreviated Good Friday session, extended gains, rising 0.6% to 4,030.5 as of 8:53 a.m. in New York.

Here’s what investors and strategists were saying:

Charlie Ripley, senior investment strategist at Allianz Investment Management

“With 280,000 jobs in the leisure and hospitality sector added, it is a clear signal that pockets of the economy that have been hit by pandemic restrictions are starting to come back to life,” he said. “Overall, the payroll data suggests that the labor market has begun to turn around, but we still have a long way to go.”

Michael Shaoul, chief executive officer at Marketfield Asset Management LLC

“The overall picture adds to the sense that monetary and fiscal policy are out of whack with the overall economy,” he said. “Although we understand that this is currently an explicit aim of both the Federal Reserve and Biden administration, the odds of unintended consequences has increased.”

Paul Ashworth, chief U.S. economist at Capital Economics

“Overall, particular segments of the labor market — like leisure & hospitality and education — remain weak because of the ongoing restrictions. But the opposite is true in many other sectors, with job openings soaring and voluntary quit rates already back to pre-pandemic levels. The upshot is that an acceleration in wage growth in those better-placed sectors could add to the upward pressure on prices this year.”

Keith Lerner, chief market strategist at Truist Advisory Services

“The initial knee-jerk reaction is positive. For today, the market is focused on this reinforcing that the economy is going to be strong and that strength should help corporate profitability as a whole. We still think there will be this tug-of-war over the coming months over this really positive economic data and how much good data before the Fed flinches or changes their posture?”

Priya Misra, global head of interest-rate strategy at TD Securities

“This is an overall very solid report. Headline, participation, even average hourly earnings — all good news. I think it is justifying the rise in Treasury rates, but the market is too optimistic about Fed hikes.”

“We still like the 5-year sector and think it will struggle to go over 1%. The long-end is tougher. The deficit is $3.6 trillion this year, so will need to attract people for all the Treasury auctions coming up. Still forecasting 10s to reach 2% later this year.”

Peter Boockvar, chief investment officer for Bleakley Advisory Group

“The uptrend in rates will likely resume. As life is always a trade off, markets and the economy are as well. The better the economy gets, the higher rates go, which itself will eventually become its own speed bump if it continues,” he said. “Equities will continue to be an either/or market. If rates rise, the Nasdaq will underperform everything else, and vice versa.”

Alan Ruskin, chief international strategist at Deutsche Bank, told Bloomberg TV and Radio

“When the year is all set and done, we’ll see the United States economy growing at a more rapid pace than China for the first time in over 40 years.”

“The big hope is that this growth is sustainable, that it’s not inflationary. Of course, there’s going to be imbalances, but from a global growth standpoint, the U.S. is definitely in the lead.”

Chris Zaccarelli, chief investment officer for Independent Advisor Alliance.

“While we still have a long way to go to repair the damage that was done to the economy last year, we’re making good progress.”

“The improving job market should increase consumer spending and that coupled with the twin tailwinds of continued monetary and fiscal stimulus is what is going to propel the stock market higher this year.”

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