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Jobs Strength Should Aid Portfolio Names

Seemingly consistent labor market strength should benefit our retail and restaurant positions.
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The U.S. Department of Labor reported this morning that initial jobless claims for the week ending May 2 were 265,000, well below consensus expectations of 278,000. Although claims are up 3,000 from last week's encouraging 262,000 total, this is still near multi-decade lows. The four-week moving average is now down to 279,500, which is 4,250 below the prior week's 283,750 rolling average and the lowest average since May 2000. Claims have now been below 300,000 for nine straight weeks, evidencing the strength of the labor market (300,000 is generally used as a threshold for labor market guidance).

The initial claims report comes one day before the highly anticipated employment report, which is scheduled for 8:30 am ET on Friday, which will provide information on nonfarm payrolls, manufacturing payrolls, and the unemployment rate (which is expected to be around 5.4%).

Although this most recent encouraging jobless claim figure has no effect on tomorrow's employment report (as it lies outside the designated survey period), we are optimistic that the low trend in claims could be an indicator that nonfarm payrolls rallied in April, especially after the meek report in March that was affected by bad weather.

In connection with our portfolio, the seemingly consistent strength in the labor market should benefit our retail and restaurant positions -- Starbucks (SBUX) , Panera (PNRA) , Lowe's (LOW) , WhiteWave Foods (WWAV) , lululemon (LULU) and Target (TGT) -- as we expect to see a boost in discretionary spending, especially when coupled with the upcoming spring and summer shopping seasons.

However, we will hold back any adamant speculation until after tomorrow's comprehensive April employment report as it will offer more clarity on the power of the economy's recovery after a mixture of cold weather, dollar strength, West Coast port disruptions and low oil prices brought confusing first-quarter results.

Regards,

Jim Cramer, Portfolio Manager & Jack Mohr, Director of Research - Action Alerts PLUS

DISCLOSURE: At the time of publication, Action Alerts PLUSwas long SBUX, PNRA, LOW, WWAV, LULU and TGT.