April Jobs Won't Change Minds

The US created 211k net new jobs in April, a sharp bounce back from the downwardly revised 79k gain in March.  It is the third month this year that the US created more than 200k new jobs. 

The unemployment rate slipped to a new cyclical low of 4.4% from 4.5%.  This seems largely a function of the decline in the participation rate.  It eased to 62.9% from 63.0%  This matches the low for the year so far set in January.

Hourly earnings rose 0.3%, but the downward revision in March to 0.1% form 0.2%, means that the year-over-year rate eased to 2.5% from the initially reported 2.7% (and now revised to 2.6%).  The work week increased by 0.1% to 34.4 hours.  Although it does not sound like much, given the 150 mln employees, the gain in the work week is more than 400k full time equivalents.  This will likely impact output, income and consumption.  One unmitigated good news was that the underemployment rate (U-6) fell to 8.6% from 8.9%.  Last April it was at 9.7%.  It is the lowest since late 2007. 

Job creation was broad-based.  Manufacturing and construction added jobs, though at a slower pace.  Leisure and hospitality added 55k jobs and education and health added 41k.  Retail jobs grew 6.3k, while financial activities hired 19k.  

Government payrolls increased by 17k.  As we noted with the Administration's federal hiring freeze, the real growth in government employment is on the state and local level.  In April the federal government lost 6k workers while state and local governments added 23k. 

The data offers the Federal Reserve nearly instant support for its claim in Wednesday's FOMC statement that the weakness in Q1 was likely driven by transitory factors.  The market upgraded the chances of a Fed hike in June and today's employment data gives no reasons to have second thoughts.  Next week's retail sales and CPI also are expected to support such views. 

In contrast, Canada reported disappointing April job figures.  It created only 3.2k jobs.  There was a loss of  31.2k full time positions and a gains of 34.3k part time jobs.  The decline in the unemployment rate fell to 6.5%, but this was a function of a fall in the participation rate to 65.6 (from 65.9%).  The cyclical low was last summer at 65.5%. 

Ahead of the second round of the French presidential election, the euro remains firm just below $1.10.  The dollar remains firm against the yen.  The US dollar stalled ahead of CAD1.38.   US interest rates are a bit softer after the employment data.  Several Fed officials will be speaking today, and Canada's IVEY is still to come, and there are some large options expiring today.  

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