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 U.S. nonfarm payrolls, unemployment and wages data are due Friday
May 6, when the economy is expected to have added 200,000 jobs in
April, with the unemployment rate unchanged at 5 percent and a wage
increase of 0.3 percent, according to Reuters data.
Unlike in recent months, where weak jobs numbers were counted on to
stave off another Federal Reserve interest rate hike, investors are
now itching for better-than-expected employment data to indicate a
stronger next earnings season, analysts said.
"The most important thing to stock investors is not what the Federal
Reserve will do in June at their meeting; the most important thing
is to see a recovery in the economy and earnings," said Hugh
Johnson, chief investment officer of Albany, New York-based Hugh
Johnson Advisors.
Even as expectations for first-quarter earnings have improved of
late, S&P 500 companies are still seen posting a 5.9 percent
earnings fall in the first quarter. On April 1, the estimate was for
a 7.1 percent decline.
With dismal U.S. gross domestic product figures released on
Wednesday showing the slowest economic expansion in two years, jobs
will be especially important for signaling a second-quarter
recovery, Johnson said.
If employment can beat estimates, markets will likely rally, Johnson
said, even if the number triggers talk of an impending rate hike at
the Fed.
After a slow climb since the start of the month, as many companies
beat ultra-low first-quarter earnings expectations, stocks fell
sharply over the last two trading days. Pushing the downturn were
Apple's results, which included the first decline in iPhone sales.
SACRIFICE THE SHORT TERM
Even if a stronger-than-expected jobs report furthers a short-term
selloff, investors would then feel more confident that a bull market
is sustainable without Fed support, said Mark Luschini, chief
investment strategist at Janney Capital Management.
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"If we're going to see positive economic growth perpetuate, it needs
to come on the back of job growth and wage increases," Luschini
said. "If we did see some disruption as a consequence of the Fed
raising interest rates, it would be welcome."
Stronger employment data signals an increase in demand for consumer
goods, which typically indicates better revenue for companies.
"The jobs report is a great running barometer on how our economy is
doing," said Jack Ablin, chief investment officer at BMO Private
Bank.
Ablin said he would pay close attention next week to any changes in
wage growth, which has been particularly stagnant.
Average hourly earnings gained seven cents in March after slipping
the prior month. Nonfarm payrolls rose 215,000 in March and the
unemployment rate edged up to 5.0 percent from an eight-year low of
4.9 percent.
In addition to employment figures, analysts said they will continue
to look at earnings reports next week, Fed officials' comments, and
economic data, including manufacturing, services sector growth and
car sales.
(Reporting by Laila Kearney Editing by Rodrigo Campos and James
Dalgleish)
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