Implications: The Federal Reserve will see today's jobs report as a sign it can and should move full speed ahead with another rate hike in June. Payrolls rose 211,000 in April after a temporary lull in March, gaining north of 200,000 for the third time in four months so far this year. Meanwhile, civilian employment, an alternative measure of jobs that includes small-business starts-ups, grew 156,000. In the past year, nonfarm payrolls are up 186,000 per month while civilian employment is up 214,000, suggesting an underlying trend of job gains of about 200,000. The gain in civilian employment helped push the unemployment rate down to 4.4%, tying its lowest level since 2001. The drop in the jobless rate was also helped along by a small gain of only 12,000 in the labor force (people who are either working or looking for work). However, in the past year the jobless rate has dropped from 5.0% to 4.4% even as the labor force has grown more than 1.7 million. In other words, the trend decline in the jobless rate is not due to workers leaving the labor force. The participation rate remains low by the standard of the last 40 years, but it's no longer consistently declining. At 62.9% in April it is at the average level of the past four years. Perhaps most important, the total number of hours worked rose 0.5% in April while average hourly earnings (which excludes fringe benefits and irregular bonuses/commission) rose 0.3%. As a result, total earnings rose 0.7% in April, the most in seven months, and are up 4.3% versus a year ago. In an environment where consumer inflation is running at about 2%, that gain in total earnings plus low debt service ratios for households leaves plenty of room for rising purchasing power among consumers. Some investors may still think job growth is due to part-time employment. But since the end of 2009, part-time employment is down 246,000 while full-time employment is up 15.4 million. Keep in mind that the recent improvement in the labor market is without actual policy changes on health care or taxes. With those policy changes, the labor market will do even better.
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