There were fractional moves in the key equity indices on Wednesday with the Dow Jones Industrial Average and the Russell 2000 Index barely closing lower, while the S&P 500 and the NASDAQ Composite Index finished higher. It will underscore the anxiety of today’s Labor of Bureau Statistics (BLS) Jobs Report.

There has been some teeth-gnashing ahead of the report ever since the March number landed with a thud.  The 98,000 number belied other economic data sources, including the Automatic Data Processing (ADP) Employment Report.

Wall Street Consensus:

• 185,000 total jobs (180,000 private)
• 4.6% unemployment rate
• Average Hourly Earnings +0.3% M/M +2.7% Y/Y

I expect the number to come in north of 200,000, but the focus for me is participation and goods-producing job creation.

Small Business To The Rescue

We look at the market every day, and the focus invariably is always on the biggest or fastest growing companies in America and abroad. They don’t get to grow, and neither does our economy without the engine of small businesses.

Underscoring this fact is job creation.

According to ADP, very small businesses -  those with one to 49 employees-created 352,000 jobs through April, which is 37% of the total of all jobs created in 2017.  In contrast with larger businesses, it is clear small business dreamers are the critical spark plug.

• Small Businesses (50 to 499): 372,000
• Mid-Sized (500 to 999): 310,000
• Large Businesses (1000+): 143,000

The amazing thing is that those small businesses carry America without any clout in Washington, D.C. and consequently, there’s little help from regulators.

Stepping up to the plate are community banks, whose stocks have been moving sideways this year after a huge post-election rally.  These community banks are at the heart of the heartland and will be key components of making America great again.

The First Trust Community Bank Index Fund (QABA) is up 31% over the past year and signs are the index has more room to the upside.  A breakout in this Exchange-Traded Fund (ETF) means higher wages and a more authentic version of the so-called virtuous cycle.

Today’s Session

Well, as I expected, the nonfarm payroll number was north of 200,000 and was better than expected after a dismal March. It was a good report overall. In April, 211,000 jobs were created, the unemployment rate dropped to 4.4% from 4.5%, Labor Participation Rate dropped to 62.9% from 63% and, the U6, or real unemployment, dropped to 8.6%, the lowest since November 2007. The bulk of the gains were in leisure and hospitality, health care and social assistance, financial activities, and mining, while construction, manufacturing, wholesale trade, retail trade, transportation and warehousing, information, and government had little change.

• Leisure and hospitality +55,000
• Food services and drinking places +26,000
• Health care and social assistance +37,000
• Financial activities +19,000,
• Mining +9,000
• Professional and business services +39,000

Average hourly earnings increased $.07 in April and have increased 2.5% over the past year. The labor market is continuing to tighten and this is something the Fed is monitoring closely in its decision making process on rate hikes.       

The futures are mixed this morning with the DOW and Nasdaq futures up, and the S&P500 down.