Instant Analysis: Employment report for April
The April jobs report came in weaker than expected in the face of improving jobless claims data. Nonfarm payrolls increased 160K in April — below economists consensus expectations for a 200K net gain in jobs on the month. This is the weakest monthly U.S. jobs report in seven months and well below the 232K job creation average over the last 12 months.Putting a pause on interest rates?
The U.S. unemployment rate held at 5.0%, pretty much where it has been over the last six months, suggesting no need to rush interest-rate normalization as the pace of labor market tightening appears to be slowing down. There was also a net downward revision in the job gains for February and March of 19K jobs — so including those net revisions the job growth was more like 141K.
If Janet Yellen needed a reason to not hike interest rates in June, I think the April jobs report gives her and the FOMC reason to do it.Some sector gains, with wage growth
Dissecting the details of the report, there was very little if any job growth in construction, trade, manufacturing, leisure and hospitality, or government jobs in April. Mining (i.e. energy sector) continued to lose jobs (7K) in April (with a total loss of 191K since the peak). Professional and business services added 65K on the month, mainly in management and technical categories, health care added 44K, and finance added 20K jobs.
The labor force participation rate slipped to 62.8% from 63.0% in March.
On a brighter note for workers, earnings growth picked up in April, with average hourly earnings increasing 0.3% on the month, and the year-on-year growth improving to 2.5% from 2.3%. However, these earnings gains are more a reflection of where the U.S. labor market has been over the last 12 months and not about where it is going in the future.Bottom line: While we have been forecasting a slowdown in job growth this year, the pace of slowing in April job growth is a bit more abrupt than we expected, and a cautious approach to U.S. monetary policy normalization appears appropriate until we see more convincing evidence of re-acceleration in the U.S. and global economy.