Markets
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Luke Kawa

US private sector job creation is sputtering

The August non-farm payrolls report showed the private sector added just 118,000 jobs in April, lower than the 140,000 estimate, with downward revisions taking July’s figure down to a paltry 74,000.

On average, private sector job growth is running at a little over 96,000 from June through August. Excluding the COVID-induced job losses, the US economy hasn’t added this few private sector jobs in a three-month span since 2012.

We can’t really hand-wave away prior bouts of weakness as due to bad weather. This is a trend and the latest addition to the pattern of lackluster US jobs data.

Traders are pricing the odds of a 25 versus a 50 basis point cut at this month’s Federal Reserve meeting as a coin flip following this release.

The optimistic spin on the August jobs data is that the unemployment rate edged lower this month (from 4.3% to 4.2%) and initial jobless claims are subdued, with both metrics well below their historical averages. As well, the prime-age employment rate (that is, the share of 25-54 year olds who have a job) is at 80.9%, tying its cycle high. This could lead you to believe that we’re in a state of maximum employment, and simply running out of people to fill the jobs.

But… we have to take off the rose-colored glasses. That line of thinking is completely undermined by the upward trend in the unemployment rate over the past year and a half. That’s telling us a greater share of people who want a job are unable to find one, and is in direct opposition to the idea that the labor market is doing the best it can do.

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Hardware stocks jump thanks to server demand and record Lenovo revenue

Server stocks are rallying as Dell, Super Micro Computer, and Hewlett Packard Enterprise ride the momentum of Hong Kong-based Lenovo. The PC maker’s stock rose 19% on Friday, hitting an all-time high, on record Q4 earnings.

Powering the positive earnings report was the company’s AI-related revenue, which grew 84% in the fourth quarter and now makes up over a third of total revenue. Investors seem to think the increased demand for servers could have trickle-down effects for other companies.

“The company’s results and commentary reinforced the outlook for strong AI-infrastructure demand while indicating resilient broader traditional server and storage spending,” wrote Woo Jin Ho, a senior technology analyst at Bloomberg Intelligence. “Lenovo’s $21 billion AI-server pipeline and remarks that demand is outpacing supply support Dell’s AI-demand momentum and point to robust orders.”

AI’s insatiable computing demand is reshaping the hardware industry and driving up server demand.

Dell will report first-quarter earnings on Thursday, May 28.

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Helena Cheng

Ross Stores surges as Q1 results beat expectations, full-year guidance raised

Ross shares are rising after the company delivered strong Q1 results, with sales topping Wall Street’s projections.

The stock soared 6.3% just after the open.

Key numbers:

  • Earnings per share of $2.02 vs. $1.47 year over year (estimate: $1.72).

  • Sales of $6.01 billion, up 21% year over year (estimate: $5.61 billion).

  • Comparable sales growth of 17% (estimate: 8.58%).

CEO Jim Conroy attributed the results to better traffic in stores. “Customer traffic was the primary driver of the strong sales trend as compelling merchandise assortments, higher customer acquisition and engagement from our ongoing marketing initiatives, and an improved in‑store experience are resonating with shoppers.”

The company also noted that transaction volume grew across all key demographics, including “income levels, ethnicities, and age groups, including younger customers.” Sales were also likely buoyed by standard seasonal tailwinds, including consumer spending from tax refunds.

Backed by the strong quarter, the company lifted its full-year targets. Ross now projects same-store sales growth of 6% to 7%, up from the prior forecast of 3% to 4%, topping Wall Street’s estimate of 4.64%. It boosted its annual EPS guidance to a range of $7.50 to $7.74, versus the prior outlook of $7.02 to $7.36.

Ross Stores has been one of the retail sector’s standout performers this year, rising around 20% year to date as of Thursday’s close.

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