Must-know: Investor expectations and key jobs reports

Surbhi Jain - Author

Dec. 4 2020, Updated 10:52 a.m. ET

The Labor Department jobs report

On Friday, April 4, the U.S. Labor Department released its Employment Situation Summary report for March. The Consensus forecast for Friday’s jobs number was 206,000. Forecasts expected a significant improvement over January and February, when harsh weather depressed hiring. This is still well below the pace needed to lower unemployment to an acceptable level.

At the same time, the unemployment rate was expected to fall a notch, to 6.6% from 6.7%—well below the 10% recession peak—but most progress has been accomplished by a falling adult labor force participation rate.

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The primary reason for this is that decent employment opportunities for prime-working-age adults haven’t kept pace with population growth. The percentage of Americans between 25 and 54 years of age who have a job is down to 76.5% from 81.8% at the beginning of this century despite more women in the workplace.

Bond yields rise on expectations of a stronger jobs report on Friday

Fed Chairwoman Janet Yellen said earlier this month that the Fed could start raising interest rates six months after the U.S. central bank ends its current monthly bond buying program, causing Treasury yields to move up.

However, Treasury yields remained largely unchanged despite more dovish comments from Yellen on Monday. Yellen said that the Fed’s extraordinary commitment to boosting the economy will be needed for some time to come.

U.S. Treasury yields rose on Monday on expectations that stronger U.S. jobs data would keep the Federal Reserve on track to raise interest rates earlier than expected. The recent strong U.S. economic data on consumer confidence, durable goods orders, and weekly jobless claims pointed to an improving U.S. economic picture after frigid temperatures hurt data at the start of the year.

As the week was scheduled to come out with The ADP National Employment report on Wednesday and the BLS Employment Situation Summary report on Friday, and Consensus estimates for both are positive over last months’ figures, bond investments turned in favor of prospective investors as bond prices fell.

Thirty-year Treasury bond yields rose 0.6% since Monday, on expectations that Friday’s employment report for March would be better than expected and therefore bolster the hawkish tone that Fed Chair Janet Yellen took earlier this month at a press conference.

Changes in the Fed funds rate can affect certain Treasury ETFs, like the iShares Barclays 1-3 Year Treasury Bond Fund (SHY) and the iShares Barclays 20 Year Treasury Bond Fund (TLT), which track the performance of short-term and long-term U.S. Treasury securities, respectively. ETFs like the SPDR S&P 500 ETF (SPY) and the iShares S&P 100 ETF (OEF), which track broader market indices and hold large-cap equities of companies like Apple Inc. (AAPL) and Exxon Mobil Corp. (XOM) in their portfolio, are useful in indicating the course the U.S. economy is taking.

To learn more about how job reports can affect your investments, see ADP signals a good payroll report, which could hurt REITs.


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