Yahoo Finance’s Myles Udland, Julie Hyman, and Brian Sozzi discuss the disappointing April Jobs Report with Joe Brusuelas, RSM Chief Economist, and Emily Roland, John Hancock Investment Management Co-Chief Investment Strategist.

Video Transcript

MYLES UDLAND: All right, we are still joined here by Joe Brusuelas of RSM and Emily Roland with John Hancock Investment Management. And Joe, I want to come to you on that number Brian was just talking about, the leisure and hospitality employment up 331,000 in the month of April. I think maybe is a little bit of a narrative dent to those who are going to look at this number and say, well, you have enhanced unemployment. No one is going to come back to work. I mean, this is the epicenter of the pandemic. And we're seeing jobs added back there. Is that, to you, an encouraging sign, as we look at, again, a pretty strange number here?

JOE BRUSUELAS: Well, it is. But, you know, to answer Brian's question directly, what is it all of us forecasters missed, we thought that number was going to be probably double the 331,000 we saw added in April. Moreover, you saw some interesting declines in temporary in help. We lost 111,000 jobs there. That's not something you tend to see in recoveries. You tend to see it swing the other way. And then you saw 16,000 jobs lost in goods producing.

OK, here's the one, you know, no jobs added in manufacturing. OK, I'm not buying that for one second. That's going to be revised up. And you'll see that strong throughout the spring into the summer and the fall. And then even 18,000 jobs lost in manufacturing. So, yeah, there's a lot of noise across this. You do tend to see that in April. But that's no excuse. I'll take a point here for the entire forecasting community. We missed this. And I welcome your hate mail and at me at Twitter.

BRIAN SOZZI: No hate mail, Joe. No hate mail. No time for that stuff, no time for that stuff.

JOE BRUSUELAS: Well, it's too late for that. I've already seen it.

BRIAN SOZZI: Fair enough. Emily, we're seeing a pretty big jump in the NASDAQ here. And as you take a step back, isn't this worse than expected jobs report really amazing news for folks that love FAANG stocks? Bad report, theoretically, you should see a rotation into some of those high growth tech names, no?

EMILY ROLAND: Yeah, so it's bad news for areas like small cap equities. And we're seeing the Russell 2000 futures moving lower here. But good news for those longer dated assets, so a lot of the names within the technology space, particularly within the NASDAQ, are parts of the market in which the future cash flows are expected to come far in the future. And those are discounted at a lower rate, that makes them more attractive.

So we are seeing this rotation this morning back into those tech names, the ones that were loved and embraced in this first part of the market recovery, coming off the March 23rd lows last year. And we think that that could continue. As we move into a more modest growth environment-- again, I expected more towards the back half of the year, clearly taking a pause on the economies on fire narrative.

This morning, you do see that those elements become more important. Looking at well-run companies, the great balance sheets, the good earnings stability, with the ability to maintain margins regardless of the economic growth backdrop, that becomes more and more important as inflation and growth expectations here start to moderate. So, again, this is just one day. And this is just one jobs report. So we want to be really careful about over extrapolating too far in terms of what the longer term asset class implications are. But I think clearly you can see them this morning, weaker dollar, lower 10-year Treasury yields, and again, that bid for growth stock.

JULIE HYMAN: Joe, coming back to the sort of reasons why people might be staying out of the workforce, you know, a lot of employers have made a lot of the idea that people are getting stimulus checks. And so, they can't be as easily enticed back to work. How big a role do you think that plays? And is there a way to really know if that is the answer from the data?

JOE BRUSUELAS: OK, so if you take a look at the last two months, right, we've added almost a million jobs, right? Normally, we'd be jumping for joy, popping champagne corks. You know, it's an interesting bumper sticker solution that probably says a lot more about one's politics than it does about what's actually happening in the economy. You know, if we had problems with people going back to work, you wouldn't see numbers like this, however disappointing the topline is today. Moreover, there are real problems in terms of access to childcare and all the schools aren't being open.

If you take a look-- and this is what happens is, is those bumper sticker solutions, they don't often survive first contact with data and rigorous testing. Let's look at the labor force participation rate in this report of females age 25 to 54, right? It's at 75.1%. That's well below the 79% we saw prior to the pandemic. Why is that? Again, unfortunately, those women who are essential to our workforce, so I mean, women get more than 50% of degrees.

Prior to the pandemic, they were the majority of the workforce. When you have that decline, you're going to have some frictions. That's what we're seeing. Again, unfortunately, women aged 25 to 54 not only are the most important workers in the workforce, they're also in charge at home of educating children in terms of direct care. Until the schools reopen, you're not going to see some of those frictions ease. But I'm confident once we get the schools reopened in the fall, women will stream back in the workforce. Watch that labor force participation rate number. Women 25 to 54, that will begin to move back towards pre-pandemic levels. We won't be talking much about this later this year.

JULIE HYMAN: Yeah, we'll be watching that. Just quickly, to end this up here, Joe, we've got Labor Secretary Marty Walsh on later on the program. What would you ask him?

JOE BRUSUELAS: You know, what I would ask him is, what is it that the labor market is going to do to ease the transition of those who've been permanently displaced in the workforce? That is those workers who largely worked in the service sector for small firms. At this point, 1/3 of the firms that were open prior to the pandemic are still not open. They're not coming back. We just have to make that call. What are we going to do for those workers?

I think that and, of course, how the Labor Department intends to deal with technological unemployment over the medium to long term as we move into a more digital transformed economy, I think those are some of the big questions that we need to see answered.

JULIE HYMAN: They're good ones.

MYLES UDLAND: All right, and we'll--

JULIE HYMAN: Thanks for the help, Joe.

MYLES UDLAND: Yeah, we'll see if he takes those. All right, Joe Brusuelas, chief economist at RSM, Emily Roland, co-chief investment strategist at John Hancock Investment Management. Thank you both so much for jumping on, on this jobs Friday. We'll do it again in a month.