April unemployment rate: 6.1% vs. 5.8% expected

Yahoo Finance’s Myles Udland, Julie Hyman, and Brian Sozzi react to the April Jobs Report with Joe Brusuelas, RSM Chief Economist, and Emily Roland, John Hancock Investment Management Co-Chief Investment Strategist.

Video Transcript

JULIE HYMAN: Let's try and get some more perspective on this as we try to wrap our heads around it. Joe Brusuelas is with us now. He is RSM Chief Economist. Also, Emily Roland, Co-Chief Investment Strategist at John Hancock Investment Management. Let's start with you, Joe. What the what? I mean, talk to us about what you think happened here with this number.

JOE BRUSUELAS: Well, we just we got a big miss in otherwise what would have been a very strong number of 266,000. We were all expecting well over a million. I think when you take a look at the report, what you're seeing is, OK, the economy's reopening. Demand is racing out in front of the reopening of the economy, but we're not adequately capturing the underlying dynamics of that.

We had a big shock a year ago. We lost over 23 million jobs. So, we're going to have these bumps in the road. I think the big takeaway though here is, as you look at this is, you can see the plummeting in the 10-year yield as the concerns about inflation are probably deflating, pun intended. And the major policy takeaway again is, both the fiscal and monetary authority need to follow through on what they're doing in terms of their own accommodationist policy.

This is no time to worry about austerity. To be blunt, no time to really worry about significant increase in inflation, despite the frictions we're obviously seeing early in the recovery.

BRIAN SOZZI: Emily, this report, really a terrible miss versus estimates. Is this a byproduct of the labor shortage we continue to hear corporate America talk about really at no end this earnings season?

EMILY ROLAND: It certainly could be. And by the way, it's pretty interesting to see the markets actually finally react to economic data. It seems like they've been impenetrable in terms of actually reflecting what's going on in the underlying economy. So, actually interesting to see this being sort of a bad news is bad news type report. And clearly there are sort of challenges, as far as the narrative in terms of growth and inflation goes as we move through this post-recessionary environment.

And when we look at this sort of either whether it's a skills mismatch. Whether-- Julie laid out some great reasons for potentially the challenges that we're seeing in terms of hiring right now. Some schools are still closed. There's challenges at home. People are still worried about the virus itself.

We're seeing a reduction in terms of the number of people that are willing to get vaccinated here. So, clearly seeing some bumps along the road, and that's being reflected in the markets. I'm also watching the weaker dollar here. We have seen a weaker dollar environment playing out here as of late, and that's got key implications across asset classes.

MYLES UDLAND: And Emily, following up on the market narrative right now. I mean, we've talked a lot on this program in the last month or so this idea that markets were growing more cautious on an economy that was strengthening, or maybe even growth was peaking. And we saw just a strange day yesterday. Some of the big momentum tech names selling off underneath the surface. Does this change maybe that narrative that had been, again, I think, really seeping into markets as we got through what's been a really stellar first quarter earnings so far?

EMILY ROLAND: Yeah, I mean, sometimes the playbook doesn't always work out exactly the way you think it's going to. And yesterday was an example of that with value doing well even though yields were lower. And what we've really seen play out was that the outperformance of growth versus value had peaked when we got news that we had a vaccine that was effective last August. And then since then, we've seen value dominate.

Now, the month of April was a little bit different as we saw expectations for growth moderate a bit, and we saw growth start to show market leadership again. And now, we're back to value. So, I think that this kind of back and forth, or as you described it, dichotomy between value and growth, there's going to continue to be a tug of war.

We want to have value. We do think that the economy is accelerating. We do think that a new economic cycle here is unfolding, but we also want to embrace growth. We think they can actually peacefully coexist in a portfolio, believe it or not.

And growth is really what you want to own, again, when expectations for inflation and economic growth start to moderate. We expected that to happen in the back half of the year, but now we're starting to see signs that maybe we need to slow down a little bit in terms of what's being priced in the markets.

JULIE HYMAN: Blasphemy, Emily. Value and growth coexisting in a portfolio. I kid. Joe, to just come back to you to sort of close off your thoughts before we go to break. Does this have any implications for this month, and next month, and the following months about how we can game out how these numbers are going to look?

JOE BRUSUELAS: No, it doesn't, because we know that we have the economy reopening. We know we've got a successful mass vaccination program. You're going to see some really large months, like we saw in March, we had in this year in April, and it is what it is, right? When you take-- when you open it up though, you really look at it, that 0.3% year ago increase in average hourly earnings, that pretty much tells you what you need to know.

We generated a lot of jobs this month. They were low paying. You should expect to see that in coming months. Without that wage push, you're not going to get the inflation the market's worried about. That's why you're seeing that reading on the 10-year yield. Boy, we've got a lot to talk about over the next 25 minutes or so.

JULIE HYMAN: We do. And so, you guys are going to stay with us, Emily and Joe. And when we come back, we're also going to hear from Brian Cheung as he gets through these numbers. And we'll check back in, and keep trying to figure out what happened last. We'll be right back.