U.S. Payrolls Declined For Fourth Straight Month, Unemployment Slipped

The Bureau of Labor Statistics reported that for the fourth consecutive month nonfarm payrolls fell. The 20,000 worker decline in April fell short of expectations for a decline of 78,000 and it followed a little revised 81,000 drop in March.

From the household sector survey, the unemployment rate slipped to 5.0% from the elevated 5.1% in March. Household employment recovered the declines during the prior two months and rose 362,000 (0.4% y/y). The labor force rose 173,000 (0.9% y/y). The labor force participation rate held steady at 66.0%, about the level of the last year while the number of persons who want a job rose slightly after two months of sharp decline.

The average duration of unemployment rose to 16.9 weeks from 16.2 in March. Those figures are down from the averages of the prior several years.

From the establishment survey, private nonfarm payrolls continued to indicate distress in the labor market. Private sector payrolls fell 29,000 last month, the fifth consecutive month of decline though it was less than the drops during the prior four months.

Factory sector jobs posted a 46,000 decline, which was about the same magnitude as declines during the prior three months. The three month rate of job loss of 4.0% was the fastest since 2003.

Construction sector employment declined 61,000 which was the largest decline since February '07. The three month growth rate deteriorated to -7.9%, its worst since 1991.

Hiring in the private service sector rose and the 81,000 increase recouped the negligible declines during the prior three months. Health care & education jobs were strongest on a one month basis. They rose 52,000 and the rate of increase has been steady near 3.0%. A 39,000 increase in professional & business services jobs accounted for much of the rest of last month's job gain but the three month change in these jobs was still a negative 0.7%. Temporary help services jobs, often a leading indicator of employment growth, fell 9,300 and the three month change fell to -10.7% (AR). Employment in finance rose 3,000 but it's still off 1.5% from the late 2006 peak. Real estate sector jobs fell 1,100 in April and were off 2.7% from the 2006 peak.

The one month diffusion index, which measures the breadth of job gain or loss (50 is the break even level), continued to indicate job loss and it stood at 45.4%. The three month index was even weaker at 42.9% which was near the lowest since 2003.

Average hourly earnings rose a negligible 0.1% after five consecutive months of 0.3% gain. Factory sector earnings fell 0.2% (+2.2% y/y) and that was the first monthly decline since 2004. Private service sector earnings rose 0.2% (3.7% y/y) after five consecutive months of 0.3% increase.

Today's announcement by the Federal Reserve that it, the European Central Bank and Swiss National Bank will expand liquidity measures can be found here.

U.S. sales of light vehicles during April dropped another 4.8% m/m to a 14.39M unit annual selling rate, according to the Autodata Corporation. So far this year vehicle sales have fallen 11.1% while, since December, gasoline prices have risen 20.9%.

Higher gas prices have weighed heaviest on sales of domestically made light trucks. They are relatively fuel inefficient and April sales fell 8.5% m/m. That brought the decline this year to 17.5%. In addition, sales of U.S. made cars fell 2.3% in April and they are down 9.4% in 2008. Overall, sales of domestically made light vehicles in April were at the lowest level since 1992.

Sales of imported light vehicles fell a relatively moderate 2.1% m/m 4.00M units after a 7.4% March increase. Despite the April decline, the latest level of imported vehicle sales remained near the record. Sales of imported autos fell just 0.7% after the 11.5% surge in March. So far this year sales of imported cars rose 1.6%. Showing that sales of imported light trucks weren't immune to the softening of overall consumer spending, they fell last month by 4.6% and the decline lowered sales so far this year by 10.5%.

Import's share of the U.S. light vehicle market rose to another record level of 27.8%. (Imported vehicles are those produced outside the U.S. and does not include vehicles with the nameplate of a foreign manufacturer produced within the U.S.) Imports' share of the U.S. car market rose to 35.9% and the share of the light truck market was 19.3%; both records and more than double the shares ten years ago.

The original weakness in German ex-auto retail sales in February had already been revised up, leaving February in a small decline. Now March sales are flat. The strength in the quarter stems from the surge back in January. Real retail sales are up at a 4.9% annual rate in the quarter. Nominal sales are up by an eye popping 8.1%. But all of the quarter’s gains stem from a surge in sales in January – a surge that still seems in the process of being unwound. While recent German surveys of consumer sentiment have been upbeat, surveys of retailers have not. It appears that real retail sales ex-autos are in a position to boost Q1 GDP but it does not seem that this is any sort of a watershed event.

French producer prices again are showing over-the-top inflation. The three-month overall rate is a 4.2% pace but that represents some deceleration from 6.6% over six months and it is below the 5.5% Yr/Yr rate. Still, inflation is up sharply from its year ago annual rate of 2.1%. And, in the quarter-to-date the overall PPI rate is still up at a 6% annual rate. The chart shows the halting roller coaster that French PPI inflation has been riding.

Consumer prices at the producer level have stayed subdued throughout, partly because consumer demand has been slack. Intermediate prices are running up strongly with all the increases in energy metals and other commodity prices. Investment goods, which have been in the booming sector in Europe, have generally kept price tends in check. But investment goods prices have accelerated slightly over three-months and at 1.4% are moderate. Core PPI inflation has reversed a declining trend and accelerated to 2.6% over three-months. At 1.8%, its Yr/Yr pace is still under the overall inflation ceiling desired by the ECB- a ceiling that formally refers only to the HICP but is applicable up and down the inflation transmission line.

The NTC MFG indices fell on broad front in April. Their declines were steeper than they have been. Still only Germany, Greece and the Netherlands are in the top half of their respective percentile ranges. The EMU economy as a whole is in the lower portion of its range of values since March of 2000. Italy, Spain and Ireland are showing extreme weakness. Still half of the EMU area’s MFG PMIs are showing expansion and are above the neutral 50 reading; the UK is another. EMU is looking vulnerable to weakness. EMU and its indices peaked in mid 2006. They cycled to a low in September of 2007, rebounded through early 2008 before taking a new leg down. The slide in Europe on the back of the rising euro makes sense. We still do not have much idea why Europe broke out of its declining phase from mid to late 2007 when the Euro was still strong. But its return to weakness makes sense.