Instant View: U.S. jobs growth at seven-month low in April

(Reuters) - The U.S. economy added the fewest number of jobs in seven months in April and Americans dropped out of the labor force in droves, signs of weakness that cast doubts on whether the Federal Reserve will raise interest rates before the end of the year.

KEY POINTS:

- Nonfarm payrolls rose by 160,000 in April vs 202,000 estimate

- March and February gains revised down by 19,000

- Private payrolls rose by 171,000 vs 193,000 estimate

- March and February private payrolls gains revised down by 25,000

- Unemployment rates holds at 5 percent

- Workforce shrank by 362,000

COMMENTS:

PHIL ORLANDO, CHIEF EQUITY MARKET STRATEGIST, FEDERATED INVESTORS, NEW YORK:

"For those who had thought a June rate hike was in play, this was a nail in coffin. The Fed is not going to change its policy statement in June at all. This raises question about a September rate hike. I would like to think the economy is in a better place at the end of year. This absolutely raises the stake on political discussion as we proceeds to November. That uncertainty on who's going win which could raise the angst for investors. We are calling for a 7 to 8 percent correction for U.S. stocks. We will continue to drift toward the 1,950 to 2,000 points for the S&P. The other indexes will follow. We are recommending investors to reduce their equity exposure, raise some cash and Treasuries. Within the stock space, we recommend they take a more defensive posture in consumer staples, healthcare, REITs, telecom and utilities. Europe looks a little more attractive than the U.S. with a bit better growth there."

PAUL CHRISTOPHER, HEAD GLOBAL MARKET STRATEGIST, WELLS FARGO INVESTMENT INSTITUTE, ST. LOUIS:

"It's an overall mixed report that is nevertheless a disappointment. The economy is not growing at a fast past, so this report doesn't really change the trajectory of the economy's modest growth. We are seeing some gradual acceleration in wages and if it continues that might get the Fed more interested in reevaluated their stance, which has been to push out the rate hikes. A positive sign that maybe is going unnoticed is that manufacturing increased employment this time, and manufacturing has been the glaring weak spot of the economy. That's an encouraging sign that growth should pick up from the 0.5 percent gain from the first quarter. Whether that's enough to urge the Fed to rethink their current strategy, I think they'll need more data."

KATE WARNE, INVESTMENT STRATEGIST, EDWARD JONES, ST. LOUIS:

"Not too hot but also not too cold. It continues to keep the Fed potentially considering a rate increase in June, but it certainly isn't the catalyst for that. Few expect any kind of rate hike in June. While there was a little worry if this was strong it would make it more likely, this clearly was not a strong report. So overall it is consistent with what we've seen so far this year, which is the economy continues to create a solid number of jobs, it says more modest economic growth and that is sort of in the middle where the Fed likely doesn't raise rates and it doesn't get more concerned about slowing growth. I don't think they definitely have to hold off in June. It's right in the middle where it doesn't say they can't raise in June but it doesn't make it more likely. This doesn't resolve any of the uncertainty about the Fed nor does it really tell us whether the weak overall economic growth we've seen from GDP is more correct than the strong job growth we've seen. It really doesn't help us resolve any of the things we were hoping it might."

"The one thing that it does say, the 0.3 percent wage growth does say the pressures from the job growth we've seen are beginning to show up in wages and becoming more consistent from month to month. We are beginning to see wage increases so if we are looking for reasons why the Fed is potentially still going in June, it is that wages really are starting to pick up."

TONY BEDIKIAN, HEAD OF GLOBAL MARKETS, CITIZENS BANK, BOSTON:

"I think market participants are looking at this as kind of a soft number, not a terrible number. Certainly we're still seeing job growth, albeit I think the market would be more comfortable seeing 200 plus prints."

"The number reinforced what the market had priced in. And we're seeing a little bit of a rally in bonds, which does make some sense, albeit not significant because we've already had a pretty big move lower in yields over the last week or so."

AARON KOHLI, INTEREST RATE STRATEGIST, BMO CAPITAL MARKETS, NEW YORK:

"The headline number was disappointing, but it backed up a lot of what ADP had said. A slight drop in the participation rate was a negative. I think those are much more relevant, and still suggest a flattener overall in terms of rates, i.e. the long end should rally. This is the kind of data that's not going to be good enough for the Fed to really be willing to hike in June or July. It takes June off the table, and I think July is starting to look more at risk, and I think you'll see that playing out in the markets. The one bright spot was average hourly earnings, which came in roughly as expected. That was a marginal positive."

"The overall effect of this print isn't going to change a lot of people's opinions, more likely you'll continue to see the market push the timeline for pricing out for the Fed, and not worry too much about the state of the U.S. economy because of a 160,000 print. We're also approaching levels in employment where it's difficult to even sustain the average."

WAYNE LIN, PORTFOLIO MANAGER, QS INVESTORS, NEW YORK:

"The question going forward is: 'Is this the beginning of a deteriorating trend in the jobs picture?' I don't think so, I think it's a natural sort of slowdown. I don't think this is any kind of harbinger of anything that's bad on the horizon, however it does signal that we are more mid to late stage than early stage in this economic cycle."

"The Fed already signaled that they are going to be more dovish, and this justifies their position. A weaker than expected number gives the Fed more room to stay accommodative or dovish for longer. I don't think this takes a June hike off the table. I think it reduces the probability, but I don't think this is a clear data point that would lead the Fed to say 'we're not going to hike in June.'"

RUSSELL PRICE, SENIOR ECONOMIST, AMERIPRISE FINANCIAL SERVICES, TROY, MICHIGAN:

"It's a disappointing number because there were five weeks, so we were expecting it to be higher. It does show businesses are more concerned about the economic outlook. Demand has been soft, so businesses are responding to that. The positive is certainly the improvement in average hourly earnings and hours worked."

(Americas Economics and Markets Desk; +1-646 223-6300)