Another disappointingly soft US payrolls number in April with employment increasing 115k in the month, below market expectations of 160k. The disappointment was tempered somewhat by the continuation of the trend of upward revisions to prior months with February and March being revised up a combined 53k.
Private sector employment rose 130k and the unemployment rate fell from 8.2% to 8.1%, thanks to a further decline in the participation rate.
The sectoral breakdown was much as expected with growth in manufacturing, business services education and health. The weak sectors were government and construction. The weak construction result gives credence to the theory that good seasonal factors boosted growth in this sector earlier in the yera and that weaker data now is the payback.
Aggregate hours worked rose a miserly 0.1% in the month, but are up 2.1% over the year, supporting our view the economy is growing a about a 2% pace. Average hourly earnings are up 1.8% over the year.
This result doesn't alter our view of continued modest growth in America and a gradual decline in the unemployment rate. After two soft results from the labour market, it's timely to remind ourselves that the high unemployment rate is as much a structural problem as it is cyclical.
We continue to worry that there is a significant mismatch between the skill-set of the currently available pool of labour and the new jobs that are being (slowly) created. I think that's a key factor behind the decline in the participation rate: some folk just don't think there's a job out there for them.
Monetary policy can't fix structural problems. American policymakers need to get their skates on and work up a comprehensive skills development program. The labour market, via soft jobs growth, is a significant constraint on a stronger US recovery. It could prove to also be the next biggest constraint via skills shortages.