NEWS AND COMMENTARY
June 2, 2000
Job Figures Boosts Wall Street Open
By Adrienne Roberts and New York Staff, Financial Times
Optimistic Market Overlooks Revised April Data...Weiss comments
NEW YORK - US stocks jumped in early trade after benign employment data boosted hopes that interest rates might have reached their peak.
Around 30 minutes after the opening bell on Wall Street, the Dow Jones Industrial Average was up around 180 points, or 1.7 per cent, while the technology-heavy Nasdaq composite gained 205 points, or 5.7 per cent.
According to Friday's US Labour Department's report on employment, the US labour market was still enjoying the best of both worlds in May. Job creation remained brisk, but it was not yet stirring up dangerous price pressures.
From an inflationary perspective, May's result was more benign than expected. Hourly wages, after rising 0.4 per cent in April, rose only 0.1 per cent in May. Many analysts had predicted 0.4 per cent.
There were 231,000 new jobs created in May, compared to forecasts as high as 500,000 and an April figure of 340,000. The unemployment rate, expected by many to stay steady at 3.9 per cent, returned to its March level of 4.1 per cent. The employment report is of considerable importance for interest rate watchers, as it is the last before the next monetary policy meeting of the US Federal Open Market Committee, scheduled for June 29. Wages, because of their potential inflationary impact, tend to be an important factor in the Fed's decisions.
The data comes against a backdrop of growing optimism that interest rates might not rise much further. Other US data released earlier in the week had been largely benign.
Receding expectations of further US interest rate increases caused excitement in the bond and currency markets.
Buried in many news articles (if mentioned at all) is the fact that the Labor Department's estimate of new jobs missed by 74,000 jobs in April. The latest report revised upward its April estimate from 340,000 to 414,000. With estimates for May as high as 500,000, we won't be surprised if this figure is increased when the June numbers are released.
It is far too soon to make blanket statements about the economy slowing and inflationary pressures subsiding. Yes, there are signs that the economy is slowing down - as evidenced by the round of economic indicators released this week - new home sales fell 5.8%, the purchasing managers survey shows weakened expansion. But, there were also reports that the drop in auto sales was attributed solely to Chrysler and GM while other automakers enjoyed robust sales and that consumer confidence remains high with retail sales experiencing growth.
The markets gleeful reaction to today's news is just another sign of their willingness to overlook all of the other evidence still pointing to an overheated economy. Rest assured, the Fed will not overlook these details.
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