Jim Cramer: Strong March Jobs Report Should Help (Not Hurt) Homebuilder Stocks

We'll get a number Friday morning that everyone fears: The U.S. Labor Department's March non-farm employment report. Ever since the U.S. economy turned up, we've found ourselves in an environment where the stronger the number, the more fears we have that the Federal Reserve will accelerate rate hikes and derail the economy.

Now, we know that's good for the banks; they make more money off your deposits with every rate hike. That's got huge bottom-line potential for all banks, such as Action Alerts Plus holding JPMorgan & Chase (JPM - Get Report) , because they basically do nothing on a new rate hike to earn the additional profits.

But higher rates are certainly tougher for business in general and, most important, in particular, housing. In fact, I believe a strong employment number would be met with a massive amount of selling in the homebuilders, the most rate-sensitive group.

But perhaps that view is out of date. Perhaps we're dealing with a different set of circumstances that makes being fearful of a strong employment number just plain old-fashioned and antediluvian vs. the Great Recession.

What makes me so confident that we may be looking at Friday's jobs number the wrong way? Simple: The conference call earlier this week from Lennar (LEN - Get Report) , the country's largest homebuilder.

First, the call was a total tour de force, sending the stock up from $57 to $64. Second, the main reason for the rise had to do with the explanation that longtime CEO Stuart Miller gave as to why his business is so strong: the U.S. labor-force participation rate. That, and not the headline non-farm payrolls number, might be the key figure to watch Friday.

Take a listen to what Miller said: "Interest rates tend to be a kind of flashpoint for homebuilding, but it's never properly contextualized. Interest rates go up within the context of an environment, and the environment right now is one of low unemployment and, generally, wage growth. And what is not talked about enough is participation rate -- labor-participation-rate improvement.
"What we're seeing in the field is that more of our customers are coming in with confidence," he said. "They're coming in with certainty about higher wages."

In other words, Miller is saying that the easier it is to get a job, the better the homebuilding business is -- and that those trends "tend to really offset the impact of a higher interest rate" (as Miller put it). So, we should focus on the labor-force participation rate, not whatever rise might come in interest rates. Frankly, this is stunning logic to me.

I always say that "panic should not be a strategy." If we see a large change in the labor-force participation rate on Friday and Lennar and the other home builders get hit anyway, these all-domestic businesses might be just the right stocks for this new anti-international-trade environment.

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