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US Payrolls Return to Form in April

Posted by Joseph Trevisani on May 8, 2015 11:43:00 AM

The American labor economy created the expected number of jobs in April, allaying concerns that last month’s weak report was the harbinger of a declining trend. But wage growth was lackluster, and, if past behavior is an indicator, consumers will not change their spending and help the economy break out from a dismal first quarter.

U.S. firms hired 223,000 new employees returning to the levels of last year after a sluggish first quarter. The unemployment rate fell to 5.4 percent, a seven low, according to the Labor Department in Washington D.C. today. Economists in the Bloomberg survey had forecast 228,000 new positions. The March total was revised down from 126,000 to 85,000, the smallest monthly figure since June 2012. 

Last year the economy created an average of 260,000 new jobs each month. In January February and March that dropped to 184,000, prompting fears that the extremely weak economic growth in the first quarter, reported at 0.2 percent annualized but now widely expected to have been as negative as 0.5 percent, would carry over into the second quarter.

Other economic data has continued to be poor. Today’s wholesale trade sales figure for March, -0.2 percent on  expectations for a 0.5 percent expansion with a negative revision to the prior month sending it down to -0.6 percent from -0.2 percent, is an example.

It does appear the job market suffered some disruption from the weather in March. Construction jobs rebounded strongly in April adding 45,000 after contracting 9,000 the month before. Mining and logging employment, which  includes oil field work, continued to decline, losing 15,000  following March’s 12,000 shrinkage as  the shakeout continues in the shale patch from the  precipitous drop in crude oil prices since last summer.

Almost half of the new positons in April, 101,800, were in the relatively poorly paid fields of retail trade, health and social work, leisure and hospital and temporary help. Employment in the more remunerative areas of manufacturing, financial services and government work rose by 50,000.  Private payrolls accounted for 95 percent of the new hires 213,000, government at all levels add 10,000. 

Wage growth was unremarkable in April, as it has been for most of the last five years. Average hourly earnings added 0.1 percent, half the median prediction and was 2.2 percent higher on the year up 0.1 percent from March but beneath the forecast by the same amount.  The average work week was unchanged at 34.5 hours, an indicator of weak demand. 

Household employment added 192,000 jobs after March’s very weak 34,000. In 2014 this sector averaged 231,000 per month.

The labor force participation rate edged up 0.1 percent to 62.8 percent from its 38 year low.  And the underemployment or U-6, which includes those who want full-time work instead of  part-time or have looked for work in the past year rather than just the past month, dropped to 10.8 percent from 10.9 percent. This the lowest for this rate since July 2008. 

 

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Bloomberg

nfp may 8

u3 may 8

wholesale trade may 8

 

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