Jobs Report: The Worst of Both Worlds?

Investors initially didn’t know how to react to the April employment report released this morning. Growth of 115,000 jobs was clearly disappointing compared to economists’ expectations of more than 160,000. But the Street had been backing away from its numbers all week, and a disappointing private employment report from ADP on Wednesday certainly prepared investors for the weakness.

Today’s jobs report also had a bright side: the government revised March and February numbers to add a net 53,000 jobs.

That might be why stock futures wavered between slight gains and slight losses in pre-market trading. Once the market opened, however, stocks fell hard. The Dow was recently down more than 120 points. The S&P 500 was off 1.2% and was dancing around 1,370, considered by technical analysts to be a key support level.

Financial stocks dropped, led by AIG (AIG), whose earnings report late on Thursday disappointed analysts. The Financial Select Sector SPDR Fund (XLF) fell 1.5%.

Investors have tended to find the bright side in mixed news over the past few months. But this jobs report could signal the worst of both worlds — it wasn’t strong enough to give investors more confidence in the U.S. recovery, but it might not have been weak enough to get Ben Bernanke and Co. off the fence on a new stimulus round. As Barclays economists wrote after the report:

“Overall, the report took on a mixed tone, with softness in the headline numbers for April tempered by upward revisions to previous data. As was our view after the March report, we do not believe the April report signals conclusively that the labor market has taken a turn for the worse. We believe the recent numbers�include a negative weather effect as previous above-trend rates of job growth have been tempered by below-trend prints. We look to the upcoming May and June employment reports to provide more clarity on whether the recent volatility in the data�is mainly weather-induced or driven by a more fundamental softening in hiring. In terms of policy, we do not believe today’s report is sufficient to shift the Fed into action at the June meeting, but we believe the Fed will certainly remain alert and in the position of monitoring the incoming data flow carefully.”