Yahoo Finance Why Did Non-Farm Payrolls Disappoint in April?
Why Was the April Jobs Report Disappointing?
April payrolls disappoint
In April 2016, non-farm payrolls rose by 160,000. Non-farm payrolls missed Wall Street analysts’ estimate of 200,000 by a wide margin. The monthly ADP National Employment Report predicted that the number would come in at 156,000. Note that ADP numbers are meant to forecast the final payroll number, not the advance number.
Private payrolls rose by 171,000 and government jobs fell by 11,000. Private services payrolls rose by 174,000 and manufacturing employment rose by 6,000. Construction employment was flat after several strong months.
Increasing construction employment bodes well for homebuilders. Health and social services employment continued to see the biggest growth, driven by aging Baby Boomers. Professional and business services employment increased from 37,000 to 65,000. The strong dollar wreaked havoc on commodity prices. This made things difficult for mining employment.
Bonds were largely unchanged in the report. Investors interested in making directional bets on interest rates might take a look at the iShares Barclays 20+ Year Treasury Bond ETF (TLT).
Are builders adding inventory?
Recent reports suggest that first-time homebuyers are making a comeback. This trend is good news for builders such as PulteGroup (PHM) and D.R. Horton (DHI). They’re big into entry-level housing. The big jump in construction jobs might indicate that builders are beginning to add some inventory. However, we’re heading into the seasonally slow period for builders.
Luxury rentals remain a big growth factor for Toll Brothers (TOL), although there seems to be a lot of foreign money piling into that sector since it’s a dollar play as well as a real estate play. Recently, Lennar (LEN) and KB Home (KBH) both reported good numbers.
Investors interested in trading in the homebuilding sector as a whole may want to look into the SPDR S&P Homebuilders ETF (XHB) or the iShares US Home Construction ETF (ITB).
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