Monday, May 5, 2014

Good jobs growth in America

April payrolls growth of +288k was better than expected.  Along with net upward revisions of +36k to the prior two months, this result took rolling 3-month average payrolls growth to +238k in April, up from +178k in March.
Jobs growth was broad-based with the biggest gains over the month coming from professional business (+75k), education/health (+40k), retail trade (+35k) and construction (+32k).

The real headline grabber was the large 0.4 percentage point decline in the unemployment rate which fell from 6.7% in March to 6.3% in April. However, the make-up of that result wasn’t as good as the headline result suggested.  The unemployment rate comes from the separate household survey which tends to be more volatile than the payrolls data with the labour force declining by 806k and employment falling 73k over the month.

The disappointment in the result was wages which were flat over the month after rising only 0.1% in March.  The annual rate of hourly earnings has now dropped back to 1.9%.  That said the strong gain in (payrolls) employment bodes well for overall income growth which will help underpin further growth in consumer spending.

While the labour market continues to recover it remains the case that the decline in the unemployment rate over-states the improvement.  Benign wage growth supports the case there is still slack in the labour market – but the question remains how much.  More on that later this week.