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  Nonfarm Payrolls Rose 164,000 in April
Posted Under: Data Watch • Employment

 

Implications:  The US labor market continues to improve.  While payroll growth for April fell a little short of expectations – growing 164,000 versus the consensus expected 193,000 – payrolls were revised up by 30,000 for prior months, making up the difference.  In the past year, payrolls are up a healthy 190,000 per month, and we expect an average pace of 180,000 over the remainder of the year.  Some analysts may worry about the meager 3,000 increase in civilian employment, an alternative measure of jobs that includes small-business start-ups.  But that measure is extremely volatile month-to-month, and (more importantly) civilian employment is still up 144,000 per month in the past year.  The best news in today's report was that the unemployment rate fell to 3.9% in April, the lowest since 2000, near the peak of the late-1990s high-tech boom.  By the end of 2019, we project the jobless rate will be 3.2%, which would be the lowest since 1953.  And it's entirely plausible that, by 2020, the jobless rate will fall below 3%.  Unfortunately, the drop in the unemployment rate in April itself was mainly due to a net 236,000 person decline in the labor force.  That said, the labor force has added more than 1 million people in the past year, and we expect further gains in the year ahead.  Yes, the participation rate fell to 62.8% in April from 63.0% in March, but the participation rate has been hovering between 62.3% and 63.1% since late 2013, so the report for April is consistent with the recent trend, with cyclical strength in the labor market offsetting the downward pressure on participation from the aging of the Baby Boom generation.  The worst news in today's report was that average hourly wages increased only 0.1% in April.  However, these wages are still up a respectable 2.6% from a year ago.  Meanwhile, total hours worked rose 0.1% in April and are up 2.2% from a year ago.  As a result, total earnings - which combine the total number of hours worked and average hourly earnings - are up a respectable 4.8% in the past year, more than enough to keep pushing consumers' purchasing power higher.  Moreover, this gain doesn't include extra earnings from irregular bonuses and commissions, like those paid out after the tax cut was passed.  Back in March, the Federal Reserve projected that the jobless rate would average 3.8% in the last quarter of this year.  We'd take the "under", and we're guessing many at the Fed would as well, which means the Fed is likely to keep hiking rates this year.  Expect rate hikes in June, September, and December, for a total of four in 2018.   

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Posted on Friday, May 4, 2018 @ 12:16 PM • Post Link Share: 
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