Domestic indexes posted strong results on Friday, May 4th, as the latest labor report data lessened investors' concerns about inflation and interest rates. Nonetheless, stocks had mixed results last week.[1]The S&P 500 dropped 0.24%, and the Dow gave back 0.20%, which marked both indices' second week of losses in a row.[2] Thanks to a bounce in tech stocks, however, the NASDAQ gained 1.26%.[3]International stocks in the MSCI EAFE decreased by 0.57%.[4] 

Amid this relatively tepid performance, we reached a big milestone on May 1st: our current economic expansion is now officially the second longest on record. For eight years and 10 months, the economy has been growing, and many sectors still have room to advance.[5] 

As we look to better understand where we stand today, Friday's employment report provides key insights into our economic health.  

What We Learned About Employment

1. Growth Slowed

The report indicated that the economy added fewer jobs than expected in April, and average hourly wage growth also grew more slowly than forecast. Federal Reserve members watch this data closely to help anticipate changes in inflation.[6] 

2. Participation Dropped

The percentage of working-age people participating in the labor force dropped by 0.1%.[7] This decline may result from people retiring or returning to school but can also come from people choosing to stop looking for work. The lower participation rate may contradict some of the more positive trends we've seen recently.[8]  

3. Unemployment Declined

Despite missing growth projections, unemployment fell to 3.9%, the lowest point in 18 years.[9] The rate has only dropped below 4% during three other periods.[10] The low unemployment numbers came more from the lower labor force participation rate than from more people finding jobs.[11]

Key Takeaway

Lower participation rates could affect long-term economic growth. However, the combination of low unemployment and reasonable wage growth are likely a positive scenario for the economy. Many people who want jobs have them, but inflation should remain under control.[12] 

As the bull market lumbers toward its ninth year, many reports continue to indicate a solid economy.[13] If the economic expansion continues through July 2019, it would be the longest in history (with records going back to the 1850s).[14] While that accomplishment would be noteworthy, our focus remains on current circumstances, and striving to find insight that affects your financial future. From trade to jobs to manufacturing and beyond, we have many details to watch on your behalf. 

ECONOMIC CALENDAR

  • Tuesday: JOLTS
  • Thursday: Consumer Price Index, Jobless Claims
  • Friday: Consumer Sentiment

 


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The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia, and Southeast Asia. 

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The Federal Reserve System (also known as the Federal Reserve and, informally, as the Fed) is the central banking system of the United States. The Federal Reserve System is composed of 12 regional Reserve banks which supervise state member banks. The Federal Reserve System controls the Federal Funds Rate (aka Fed Funds Rate), an important benchmark in financial markets used to influence the supply of money in the U.S. economy.

Inflation is the rise in the prices of goods and services, as happens when spending increases relative to the supply of goods on the market. 

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

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Consult your financial professional before making any investment decision.

Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

These are the views of Platinum Advisor Strategies, LLC, and not necessarily those of the named Broker dealer or Investment Advisor, and should not be construed as investment advice. Neither the named Broker dealer or Investment Advisor gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your financial advisor for further information.

[1] www.reuters.com/article/us-usa-stocks/wall-st-rallies-as-inflation-fears-ebb-apple-hits-record-high-idUSKBN1I51CG
[2] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=SPX®ion=usa&culture=en-US
http://performance.morningstar.com/Performance/index-c/performance-return.action?t=%21DJI®ion=usa&culture=en-US
www.reuters.com/article/us-usa-stocks/wall-st-rallies-as-inflation-fears-ebb-apple-hits-record-high-idUSKBN1I51CG
[3] http://performance.morningstar.com/Performance/index-c/performance-return.action?t=@CCO
www.reuters.com/article/us-usa-stocks/wall-st-rallies-as-inflation-fears-ebb-apple-hits-record-high-idUSKBN1I51CG
[4] www.msci.com/end-of-day-data-search
[5] www.bloomberg.com/news/articles/2018-05-01/as-u-s-expansion-hits-endurance-milestone-here-s-what-s-next
[6] www.cnbc.com/2018/05/04/us-stock-futures-dow-earnings-trade-talks-and-nonfarms-on-the-agenda.html
[7] www.bloomberg.com/news/articles/2018-05-04/tepid-wages-participation-mute-celebration-on-u-s-jobless-rate
[8] www.usnews.com/news/articles/2018-05-04/unemployment-hits-lowest-level-since-2000
[9] www.cnbc.com/2018/05/04/us-stock-futures-dow-earnings-trade-talks-and-nonfarms-on-the-agenda.html
[10] www.bloomberg.com/news/articles/2018-05-04/tepid-wages-participation-mute-celebration-on-u-s-jobless-rate
[11] www.usnews.com/news/articles/2018-05-04/unemployment-hits-lowest-level-since-2000
[12] www.reuters.com/article/us-usa-stocks/wall-st-rallies-as-inflation-fears-ebb-apple-hits-record-high-idUSKBN1I51CG
[13] www.bloomberg.com/news/articles/2018-05-04/nine-days-one-signal-u-s-economy-is-doing-fine-if-not-great
[14] www.bloomberg.com/news/articles/2018-05-01/as-u-s-expansion-hits-endurance-milestone-here-s-what-s-next