Jobs report offers clues to future

NEW YORK – The government’s monthly jobs report is one of the most closely watched indicators on Wall Street, but just what does it tell professional investors, and should it matter to the rest of us?

With Federal Reserve policy makers in the midst of a rate-tightening cycle, virtually every piece of economic data is being viewed with an eye toward inflation. If growth accelerates and inflation rises, the Fed is likely to be more aggressive in raising the overnight lending rate, which would almost certainly be bad for stocks.

“The professional investors, and to some extent, the small investors, can’t ignore that the financial markets are on severe inflation watch,” said Anthony Chan, senior economist with JPMorgan Asset Management. On its face, Friday’s employment report looked to be a disappointment. Only 110,000 jobs were generated in March – half the 220,000 economists on Wall Street were expecting. But it was initially interpreted as good news for stock investors because it seemed to allay fears that the economy was overheating.

That notion was eclipsed a short time later by an Institute for Supply Management report showing a surge in service sector activity. The data, inadvertently released two business days early, reignited inflation anxieties and helped sink a stock market already pressured by record-high oil prices.