U.S. Employment Growth Recovers; Jobless Rate Continues Lower

The labor market rebounded somewhat last month following its March disappointment. Nonfarm payroll employment increased 165,000 (1.6% y/y) during April. That followed upwardly revised gains of 138,000 and 332,000 during the prior two months, earlier reported as 88,000 and 268,000, respectively. Consensus expectations were for a 160,000 increase. Improvement in the service sector led job growth last month. The unemployment rate fell during April to another cycle-low of 7.5%, the lowest since December 2008. A 7.6% rate had been expected. The jobless rate on the broadest measure of unemployment, which includes marginally attached & those involuntarily working part-time, ticked up m/m to 13.9%.

The jobs picture painted in the report on nonfarm payrolls showed mixed improvement. Growth was confined to the private service sector where payrolls increased 185,000 (2.1% y/y) following a 139,000 March gain. Professional & business service jobs rose 73,000 (3.3% y/y) while leisure & hospitality employment increased 43,000 (2.8% y/y). Jobs in trade, transportation & utilities improved by 37,000 (1.7% y/y). Employment in retail trade rose 29,300 (1.7% y/y) while health care jobs gained 26,100 (2.1% y/y). Financial activities employment rose 9,000 (1.3% y/y) but information sector hiring fell 9,000 (+0.4% y/y). In the factory sector, employment remained unchanged (0.6% y/y) while the number of construction jobs fell 6,000 (+2.7% y/y). Government sector jobs fell 11,000 (-0.4% y/y).

The mixed nature of last month's employment rise was highlighted by the diffusion index of one-month job change. At 53.9% it compared to a cycle-high of 72.2% in January of last year. In the factory sector, the index fell to a below break-even 44.4%. In addition, workers were on the job for a lessened 34.4 hours last month. In goods producing industries the workweek fell to 40.2 hours while in private services it fell to 33.3 hours.

Earnings growth has taken a hit as job increases have eased. The 0.1% uptick (1.7% y/y) in average hourly earnings followed no change during March. Goods producing earnings rose a steady 0.1% (1.3% y/y) while earnings in the private service sector also gained a stable 0.1% (1.8% y/y).

From  household survey, the slip in the jobless rate to 7.5% reflected a 293,000 increase (1.2% y/y) in employment which made up March's decline. The labor force rose a lesser 210,000 (0.5% y/y) and that recovered just a third of the prior two months' contraction. The labor force participation rate was stable at 63.3% but remained down from its 67.1% high averaged from 1997 to 2000. The number of persons not in the labor force totaled 89.936 million (1.8% y/y). The number of discouraged workers fell 13.7% y/y. The median duration of unemployment fell to 17.5 months. The percentage of those unemployed who were out of work for more than one year rose m/m to 28.0% but that still was down from the 32.8% peak two years ago.

The figures referenced above are available in Haver's USECON database. Additional detail can be found in the LABOR and in the EMPL databases. The expectation figures are from Action Economics and are in the AS1REPNA database.