Upside Surprise as Job Growth Hits 288K, U Rate Down to 6.3 Percent
- The April Payroll Employment Survey showed a much better-than-expected gain of 288,000 jobs.
- The Unemployment Rate for April fell to 6.3 percent, but not for good reasons.
- Auto Sales for April dipped to a still-strong 16.0 million unit pace following the March rebound.
Labor market conditions are improving significantly after a winter lull. Not only did April payroll job growth beat expectations at 288,000 jobs, but March and February job growth was revised up. Adding April’s 288,000 jobs, to the upward revisions to March and February means that we have 324,000 more payroll jobs in the economy than we thought we had a month ago. That is enough employment to account for a medium sized city. The recent pattern in job growth reaffirms that December’s 84,000 net new jobs, and January’s 144,000 net new jobs, were anomalous on the down side. In October we generated 237,000 net new jobs. In November it was 274,000. In February we got 222,000, and in March, 203,000. Said another way, the average job growth for 5 out of the last 7 months is an impressive 245,000 jobs per month. The recent strong job growth is a very favorable forward-looking indicator that should give us comfort in looking past the weak GDP report for the first quarter. The unemployment rate for April dipped to 6.3 percent, breaking through the Federal Reserve’s now abandoned 6.5 percent threshold level. While it is nice to see the drop, the unemployment fell for the wrong reasons in April. The household employment series, which feeds into the unemployment rate, actually showed a decline of 73,000 jobs after surging in March by 476,000. Same for the labor force. It fell significantly, by 806,000 workers in April, after surging by 503,000 in March. The average workweek for all employees was unchanged in April at 34.5 hours. Likewise, average hourly earnings were unchanged. Still, the significant gain in jobs for the month is supportive of solid income growth.
Job gains in April were widespread across most major industry groups. Construction added 32,000 jobs, with gains on both residential and nonresidential trades. Manufacturing added 12,000 jobs, mostly on the durables side, consistent with improving manufacturing metrics. Wholesale trade gained 15,700 and retail trade added 34,500 jobs. Information services lost 3,000 jobs in April. Financial services gained 6,000 with much of the gains coming from real estate related categories. Professional and business services added a strong 75,000 jobs. Education and healthcare employment was up 40,000. Leisure and hospitality gained 28,000 jobs in April. Even the government sector, which has been a job shedder of late, added 15,000 jobs in April.
U.S. auto sales for April dipped to a still-strong 16.0 million unit sales rate in April, after rebounding to a 16.4 million unit in March. Recent solid job growth will support ongoing gains in auto sales this year.
Market Reaction: U.S. equity markets opened with gains, but have since corrected. The yield on 10-Year Treasury bonds is up to 2.65 percent. NYMEX crude is up to $99.46/barrel. Natural gas futures are up to $4.74/mmbtu.
For a PDF version of this Comerica Economic Alert click here: Employment 05-02-14.