Jobs Growth In the US Continues to Rise

Job growth in the US continues at a torid pace. The US Labor Department reported that April payrolls increased by 263,000 compared to expectations that job growth would increase by 190,000. This comes after a larger than expected increase in private payrolls reported early in the month by ADP. Private payrolls have been a robust forecasting tool, and provide a good gauge of the direction of jobs gains.

The unemployment rate, which is a separate household forecast declined to 3.6% in April, which is the lowest measure since December of 1969 according to the Labor Department. Wages for hourly workers continue to rise, climbing 3.2% year over year, unchanged from March. Expectations had been for the unemployment rate to rise to 3.8%, while wages were expected to rise by 3.3%.

March Figures Were Revised

The March and February employment figures were revised. March was revised slightly lower to 189,000 while February was revised slightly higher to 56,000. The next upward revision of the past jobs reports showed an increase of 16,000 jobs. So far in 2019, employers have averaged 205,000 jobs per month. This is a slightly decline from 2018 when job growth was 223,000. The average is in line with the average growth rate seen over the past 8-years.

The Breakdown

Most of the hiring in April was in the professional business services sector with construction and health care also contributing. Employment in retail fell for the third straight month. All levels of government added a net 27,0000 jobs in April. According to the Labor Department, the unemployment rate fell partly because the number of people looking for jobs declined by 500,000. The participation rate declined to 62.8% in April down from 63% in March. This rate is only slightly above the all-time low seen in 2015 at 62.4%, showing that there is more capacity for the jobs market to grow.

Overall unemployment, referred to a U6, was unchanged at 7.3%. This incorporates discouraged searchers plus Americans stuck in part-time jobs but who want to work full time. Workers’ wages increased by 6 cents per hour. The annual increase in wages was much stronger than the 2.8% increase in April 2018 from a year earlier. But pay gains haven’t accelerated much further since year-over-year wage growth broke above 3% for the first time in nearly a decade last year. Friday’s report showed the average workweek in April fell to 34.4 hours.

The rise in wages has not spilled over into inflation expectations. Early in the month, the Commerce Department reported that core Personal Consumption Expenditures, the Fed’s favored gauge for inflation, dropped to 1.6% year over year. Commodity pricse are on the decline which has led to an acceleration in commodity trading. This decline in annual inflation is a concern for many, which has led to a discussion amongst market pundits that the Fed might consider dropping its dual mandate. The Federal Reserve by law in the US needs to target both employment and inflation. This has also led many to call for the Fed to cut interest rates, given the low level of inflation.

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