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Jobs Report Less than Meets the Headlines

Posted by Joseph Trevisani on May 2, 2014 11:28:00 AM

In the headlines it was the best payrolls report in more than two years, but underneath the news flash the details were more than disappointing for the long term health of the American labor market

The U.S. economy created 273,000 jobs in April and the unemployment rate fell to 6.3 percent. Both are excellent statistics, much better than the forecasts and, at face value, indications that the winter slowdown and stumbling recovery and mediocre job production of the past few years might be finally ending.

Over the past three months the labor force has increased by 1.3 million people, those are people who have or are looking for work.  It appeared that some of the millions of long term unemployed, who are not counted in the unemployment rate, were finally encouraged to again look for a job. 

In the near term, this would have prevented the unemployment rate from falling quickly as these folks would then be counted as searching for work and thus unemployed. Over the longer term it would be a benefit the U.S. economy boosting income and consumption.

The details of the employment situation report, however, put paid to that hope.  The labor force fell by an extraordinary 806,000 people in April. Many of those who began looking for work since the New Year must have given up. The labor force participation slipped 0.4 points to 62.8 percent back to the 35 year low that it had reached in October and December last year.

Average weekly hours and wages were also unchanged.  If the economy were truly accelerating then employers would not only be hiring but also assigning more work to existing workers.  Annual wages gains fell to 1.9 percent from 2.1 percent in February and March.  Household employment, tabulated by the survey that produces the unemployment rate dropped 73,000 after March’s 450,000 gain.

All in all it was a deceptively positive jobs report.

 

Joseph Trevisani                                                                                                        

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Bloomberg

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