Good March Jobs Report Boosts Interest Rates, Stock Futures

March Jobs Report Boosts Interest Rates, Stock Futures
March Jobs Report Boosts Interest Rates, Stock Futures

Stock markets are closed for Good Friday, but the markets for stock futures and bonds opened for short sessions Friday morning, and those open markets reacted positively to the news that 162,000 new jobs had been created in March -- a good showing, though 28,000 fewer than economists expected. The unemployment rate remained at 9.7%. Interest rates and stock futures were up.

The increases in interest rates and stock futures were small but noticeable. The AP reported that the yield on the 10-year Treasury note rose three basis points (100 basis points equals 1%) to 3.90% Friday morning. That means slightly higher credit card rates. Meanwhile, The Wall Street Journal reported that Dow futures were up 17 points, S&P 500 futures inched up 1 point, and Nasdaq futures rose 6 points.

The modest positive reaction on a light volume trading part-day perhaps reflected the ephemeral nature of many of the jobs reported. The Journal pointed out that almost a third of those 162,000 new jobs were related to hiring for the census. However, CNNMoney noted that some economists expected all of March's gains to come from the census, so the two-thirds of the job gains which came from private employers' hiring were a pleasant surprise to investors.

And those private sector jobs appeared to be distributed among several industries. As CNNMoney reported, construction added 15,000 jobs -- a feat it had not accomplished in three years. Manufacturing added 17,000 jobs, 2,500 of which came from auto plants and their parts suppliers. Retailers added 15,000 jobs, and leisure and hospitality contributed 22,000 jobs to the total for March.

For those who think that the markets anticipate economic activity, these statistics provide evidence that President Obama's economic stimulus activities may be starting to bear fruit in the form of hiring to meet growing demand. With the S&P 500 up 39% since Obama's inauguration, the question for investors is whether now is the time to shift more money out of money-market funds and into stocks.

If those interest rate rises continue, they will reflect the markets' verdict that the risks of inflation outweigh those of deflation. And ultimately, the underlying economic growth reflected in that assumption means that we could be in for a virtuous cycle, wherein job growth boosts income, leading to increased consumer spending, rising demand, and more hiring. And that could provide fuel for a further rise in equities.