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Jobs Reports – How Meaningful Are They?

Author: Dan Brecher|May 9, 2014

Jobs Reports – How Meaningful Are They?

The U.S. Labor Department’s release of the monthly jobs report has a significant impact on the market. The report contains key employment data related to all aspects of the job market, including the unemployment rate, and is an indicator of economic health. But with adjustments being made after each monthly report, we are left to wonder how meaningful the report is to anyone other than stock traders and newscasters?

A positive jobs report is viewed by many investors as a sign that growth is back on track, which tends to lower prices on yield-based securities. The Federal Reserve is more likely to increase interest rates, which results in yields to rise and prices to fall in rate-sensitive portions of the market. Additionally, a positive report can result in inflation.

A negative jobs report has the opposite impact. The Federal Reserve is more likely to cut rates and it reduces the likelihood of inflation, both of which can positively impact prices of rate-sensitive investments.

So, does the jobs report actually indicate how the economy is doing, or does the market simply react if the report turns out differently than expected? The recent April jobs report revealed the creation of 288,000 jobs from an upwardly revised 203,000 in March, with the jobless rate of 6.3%. Expectations were for only the addition of 210,000 jobs in April, so the average person can be happy with this report, and the Federal Reserve has indicated that it expects job growth to continue to improve.

If you have any questions about the impact of the jobs report or would like to discuss other corporate, securities and investment banking matters, please contact me or the Scarinci Hollenbeck attorney with whom you work. 

Jobs Reports – How Meaningful Are They?

Author: Dan Brecher

The U.S. Labor Department’s release of the monthly jobs report has a significant impact on the market. The report contains key employment data related to all aspects of the job market, including the unemployment rate, and is an indicator of economic health. But with adjustments being made after each monthly report, we are left to wonder how meaningful the report is to anyone other than stock traders and newscasters?

A positive jobs report is viewed by many investors as a sign that growth is back on track, which tends to lower prices on yield-based securities. The Federal Reserve is more likely to increase interest rates, which results in yields to rise and prices to fall in rate-sensitive portions of the market. Additionally, a positive report can result in inflation.

A negative jobs report has the opposite impact. The Federal Reserve is more likely to cut rates and it reduces the likelihood of inflation, both of which can positively impact prices of rate-sensitive investments.

So, does the jobs report actually indicate how the economy is doing, or does the market simply react if the report turns out differently than expected? The recent April jobs report revealed the creation of 288,000 jobs from an upwardly revised 203,000 in March, with the jobless rate of 6.3%. Expectations were for only the addition of 210,000 jobs in April, so the average person can be happy with this report, and the Federal Reserve has indicated that it expects job growth to continue to improve.

If you have any questions about the impact of the jobs report or would like to discuss other corporate, securities and investment banking matters, please contact me or the Scarinci Hollenbeck attorney with whom you work. 

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