'US Employment Shock Only 1/4 of Expected... Treasury Yields Fall, Nasdaq Rises (Comprehensive)'

[Image source=AP Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] Expectations that 1 million jobs would be newly created in the U.S. last April have cooled sharply. The report card showed only 266,000 jobs, about one-quarter of the forecast. The unemployment rate, which was expected to fall to 5.8%, instead rose to 6.1%. The anticipation of employment expansion has turned into concerns that this might signal a red light for the U.S. economic recovery.

The April employment data released by the U.S. Department of Labor on the 6th (local time) was shocking given the high expectations. Most American economists had predicted a surge in employment thanks to the expanded distribution of COVID-19 vaccines and the reopening of economic activities.

It was not just April that was weak. The March employment increase of 916,000 was also revised downward to 770,000.

While 331,000 jobs were added in hospitality sectors such as restaurants and leisure, manufacturing employment decreased by 18,000. The decline in manufacturing jobs mostly occurred in the automobile industry, which halted operations due to semiconductor shortages.

In retail, 15,000 jobs disappeared, and 4,000 jobs were lost in the healthcare sector. Temporary employment was reduced by as many as 110,000.

The Wall Street Journal reported that some companies are struggling to hire workers, and combined with supply chain issues, the possibility of a slowdown in economic improvement has resurfaced.

The employment slump immediately impacted the market. The yield on the U.S. 10-year Treasury note fell further after the employment data release, dropping to 1.531%. Concerns over delayed economic recovery fueled a preference for safe assets, driving up bond prices.

This contrasted with recent remarks by Treasury Secretary Janet Yellen, who stated that interest rate hikes would be necessary as the economy recovers.

As Treasury yields declined, Nasdaq futures extended their gains to 1.4%. Meanwhile, Dow Jones futures gave up their gains and turned down by 0.05%.