Employment Situation: Strong Gains As Unemployment Rate Drops

Bottom Line: Nonfarm payroll growth rose sharply in April led by very strong gains in professional and business service jobs. Construction and government jobs were also strong while the retail sector continued to shed jobs. The unemployment rate fell 20bps to 3.6% due to a surprise decline in the labor force. The household employment survey, used for calculating unemployment, also showed a surprise decline, diverging sharply from the payroll survey and suggesting there may have been data collection issues causing volatility in these data-points. Wage growth was a touch lower than expected wit the total weekly paycheck falling as hours worked also fell slightly. Still, these data were not enough to change the overall trend towards moderately accelerating wage gains, if still well below rates of growth seen in prior cycles. Overall this was another solid report, confirming the trend towards robust and tight labor markets. Payroll Employment rose by 263k in April, compared with market expectations for an increase of 177k. The prior 2 months were revised, lower in March by 7k and higher in February by 23k. Government jobs ROSE by 27k. Consequently, private sector jobs ROSE by 236k. Overall employment is now 1.8% ABOVE its year ago level, Over the past 12 months, 2,620k jobs have been created.

• In April, the job gains were in Trade, Transportation & Utilities (+17k with -12k of those in Retail Trade),
• Professional & Business Services (+76k with the addition of 17.9k in Temp Help Services),
• Education & Health Services (+53k),
• Leisure & Hospitality (+34k),
• Construction (+33k),
• Government (+27k),
• Other Services (+14k), and
• Financial Activities (+12k).
• Jobs were shed in Information (-1k).

The Unemployment Rate FELL by 0.2 percentage points in April to 3.6%, compared with market expectations for a no change to 3.8%. Household employment fell by 103k while the labor force declined by 490k, resulting in a decrease in the number of unemployed of 387k. The Labor Force Participation Rate FELL by 0.2 percentage points to 62.8%. The Employment-Population Ratio was UNCHANGED by 0.0 percentage points to 60.6%. The number of people Working Part-Time for Economic Reasons ROSE by 150k to 4,589k. while Long-Term Unemployment FELL by 75k to 1,230k (accounting for 21.1% of the unemployed), while the Mean Duration of Unemployment ROSE by 0.7 weeks to 22.9 weeks. There are now 5.8 million people officially unemployed. In addition, there are another 5,121k people who say they want a job but are not currently looking for one. Finally, another 4,589k people are working part-time because of slack economic conditions. Hourly Earnings ROSE by 0.2% in April, below market expectations of 0.3%. Hourly earnings are now 3.2% ABOVE their year ago level. Weekly Earnings FELL by 0.1%, the result of the change in hourly earnings and a shorter workweek. Weekly earnings are now 2.9% ABOVE their year ago level. The Average Workweek FELL by 0.1 to 34.4 hours, BELOW the market consensus at 34.5 hours.