Undeterred by geopolitics, markets continued to march higher this week with tech stocks in particular doing most of the heavy lifting. With economic data continuing to show resilience and little to report this week regarding the Strait of Hormuz, it seems inevitable that investors went with the flow and rode the momentum higher. While concerns regarding inflation and higher gas prices on disposable income are logical, the effects aren’t yet being seen in the data. Until then let’s enjoy the new all-time highs and hope for a resolution to the conflict with Iran soon.
Perhaps the biggest news this week came today in the form of the April Nonfarm Payrolls report. The report stated the U.S. economy added 115,000 jobs in April, significantly beating analysts’ expectations of 55,000 jobs. Over the past 10 years, monthly job growth has ranged from 168K to 228K except for the pandemic recovery which saw job growth skyrocket in 2021 and 2022 to the tune of 380K to 562K per month.
Economists now anticipate job growth of 55,000 per month is enough to keep the unemployment rate low but are unsure if it is sufficient to drive robust economic growth. In the past, monthly job growth below 100,000 signaled a weak labor market. As recently as 2024, economists estimated that the U.S. economy needed to add between 150,000 and 230,000 jobs per month to match population growth. However, with a sharp slowdown in labor force growth and net immigration outflows, the breakeven range is now estimated to be between 15,000 and 87,000 jobs per month. But like I said, full employment and a robust economy are not synonymous. While the unemployment rate may stay low, economic growth as measured by gross domestic product (GDP) may become more dependent on productivity gains from automation and artificial intelligence in lieu of workers.
I guess the theme this week is jobs. In recent months, more than a few large companies have reported significant layoffs. Among those are Amazon (-16,000) due to AI infrastructure buildouts, UPS (-30,000) attributed to post-pandemic normalization of e-commerce, Oracle (-18%) to fund cutting-edge AI cloud data centers, Intel (-25,000) due to heavy competition from rivals, Citigroup (-20,000) to simplify the bank’s operational structure, Microsoft (-15,000) to realign with its primary software infrastructure goals, PayPal (20%) due to a rapid integration of automated fintech software, Dow Inc (-4,500) ascribed to automated systems and industrial AI, Meta (-10%) due to a pivot toward generative AI, Coinbase (-14%) to restructure as an “AI-native” organization, and Cloudflare (-20%) as it moves toward “AI-native” customer service software. Let’s not forget the 17,000 employees at Spirit Airlines who will soon be looking for work as the company files bankruptcy. It’s no wonder consumer sentiment is at its lowest point since the University of Michigan started tracking this in 1952.
I don’t want to end on a sour note. In closing, let’s look at where job growth is not just resilient but strong and growing. Payroll firm ADP released a report this week showing which of the 53 metro areas have the most favorable employment conditions for recent college graduates. The winner is Birmingham, AL due to strong hiring and high affordability. Rounding out the top five are Tampa-St. Petersburg, FL, San Jose, CA, Columbus, OH, and Raleigh, NC. Interestingly, six of the top 10 are in Southern metro areas driven by hiring momentum, median wages, and affordability. Shout out to Columbus! Now you know.
Bruce J. Mason, MBA
