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Registered Investment Adviser Caleb Lawrence

Despite what is a pretty solid and ahead of expectations employment report the major averages can’t seem to find any conviction entering the final hour mixed. Since Monday the Standard and Poors 500 Index is essentially unchanged while the NASDAQ has managed to gain just 11 points or about .2%.

The April employment report showed 211,000 new jobs created as the official unemployment rate hit a 10-year low of 4.4%, average hourly earnings increased .3%, weekly hours gained .1, while the Employment-Population ratio increased to 60.2%, the Labor Force Participation Rate slipped fractionally to 62.9%. One of the better employment reports in some time for what is an often-volatile series, so 1-month needs to be taken with a grain of salt. The previous 2-months were revised fractionally lower while the 3-month average job creation figure was relatively unchanged at 176,000, a decent figure slightly ahead of demographic trend figured to be about 150,000. As has been the trend in the post crisis period since 2007 quality of jobs created remains low.

Today’s employment report should take some of the fear out of the 1st quarter Gross Domestic Product report that managed to gain just .7%, encouraging the Fed to resume interest rate increases. Given the Fed’s official 1% Federal Funds rate it should be noted that the last 15-years or saw Federal Debt service costs balloon from some 300 billion to 508.9 billion in the first quarter an increase of about 66%. If the Fed follows through with its rate increases a ½ Trillion Dollars in debt service costs at 1% becomes a trillion Dollars at 2% and 1.5 Trillion at 3%. This has been said about Japan repeatedly and is one of the reasons why they don’t raise rates. When push comes to shove neither will we as debt service costs will become ruinous, just like Puerto Rico.

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