US monthly employment numbers are always the focus of attention and invariably provide a surprise for observers. Consensus forecasts are, more often than not, wide of the mark. Last week, the surprise was a pleasant one, as government statisticians estimated that a whopping 274,000 new jobs were created in April ? beating forecasts by a good margin.

Employment creation was fairly broadly based among the sectors, though the manufacturing sector actually lost jobs. However, manufacturing has been battling with structural issues for a long time and the revelation of job losses wasn't out of line with ongoing trends.

Employment numbers were also revised upwards for the month of March, all of which gave hope to the bulls that the economy was just going through a soft patch, earlier in the year, and may soon revive. However, monthly payroll data swing up and down quite a bit and we have to look at the trend to get a better fix on how the economy has been performing.

Looking at the trend, job growth has indeed been clocking in at a decent average, but nothing to shout about. It is consistent with a reasonable pace of economic growth, not an accelerating one.

What's more, employment data are lagging or, at best, coincident indicators of the state of the economy. Forward-looking leading indicators are still signalling a loss of momentum in economic growth. As for the inventory build-up, it also points to a slowdown as de-stocking takes place.

Last but not least, the Fed is still in tightening mode. It implemented another ? fully expected ?25 basis-point increase in the fed-funds target rate last week, and there is more to come. The statement that the FOMC released was fudgy enough to allow it the flexibility to change its stance according to changing circumstances. And, no, it did not drop the word "measured". Why should it remove a word that has already lost any precise meaning in this context?

As things stand, inflation is certainly ticking higher, but there is no inflationary spiral in the offing, so it may be unnecessary to turn the monetary screws really hard to have the desired effect of preventing inflation from getting out of hand.

Implementing monetary policy is not a precise science and, on balance, the Fed is likely to err on the side of under-doing it rather than overdoing it. There may be concern about the fragility of household finances. In addition, it is Greenspan's view that current economic structures are less conducive to generating inflationary spirals than in the past.

But that doesn't make the going easy for the equity market. When liquidity is being removed and the fed-funds rate is on the rise, equity valuations are hurt. Multiples tend to contract, and earnings growth may not be sufficiently strong to have a counteracting effect.

Risk appetite has diminished, but there are few signs of a significant deterioration in sentiment indicators. The VIX volatility gauge has yet to rise much higher, and we can say much the same thing about the put/call ratio. Meanwhile, corporate insiders aren't indulging in aggressive selling,

As for individual investors, fund flows show that they are not engaging in the wholesale dumping of riskier equity classes such as emerging markets. At the same time, the global Emerging Market Bond Index (EMBI) spread has risen from very low levels, but hasn't widened dramatically.

Value stocks are outperforming growth, and bigger cap is beating smaller cap, but the differences aren't very large. Also, high quality (as defined by better credit ratings) is providing better returns than lower quality, but not by a big margin. In other words, we have yet to notice a significant flight to safety.

UK growth is decelerating. The latest data from the British Retail Consortium shows a sharp fall in retail sales, confirming earlier gloomy earnings reports from retailers. In addition, we are seeing evidence that the manufacturing sector is under increasing pressure, registering a sharp drop in the latest numbers for March.

Faced with a slowing economy it wasn't surprising that the Bank of England left its benchmark rate unchanged at 4.75 percent. The expectation is that the BoE will hold rates steady in the short term, with speculation increasing that they may even ease in the fourth quarter. Meanwhile, a weaker economic outlook has pushed sterling lower versus the dollar.

Consumers in the Eurozone are also cautious. They are reacting to rising unemployment and high oil prices by cutting back on spending. The evidence is showing up in weaker retail sales.