The surprising GDP boom in the first quarter doesn’t look like a fluke at all. Job creation had its biggest gain in April since the first of the year, adding 263,000 jobs and sending unemployment to a 49-year low. The latter might have more to do with the vagaries of the BLS Household survey, but don’t expect the White House to quibble with those details:
Total nonfarm payroll employment increased by 263,000 in April, and the unemployment rate declined to 3.6 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in professional and business services, construction, health care, and social assistance. …
The unemployment rate declined by 0.2 percentage point to 3.6 percent in April, the lowest rate since December 1969. Over the month, the number of unemployed persons decreased by 387,000 to 5.8 million.
Among the major worker groups, the unemployment rates declined in April for adult men (3.4 percent), adult women (3.1 percent), Whites (3.1 percent), Asians (2.2 percent), and Hispanics (4.2 percent). The jobless rates for teenagers (13.0 percent) and Blacks (6.7 percent) showed little or no change.
Among other good news, the revisions for the last two months added 16,000 jobs to the 2019 total. However, one part of the good news comes with a grain of salt. The first hint that the significant drop in the U-3 unemployment rate might not be exactly what it means comes in the workforce ratio measures. If unemployment dropped that significantly, one or both of these measures should have increased. Instead, one actually declined:
The labor force participation rate declined by 0.2 percentage point to 62.8 percent in April but was unchanged from a year earlier. The employment-population ratio was unchanged at 60.6 percent in April and has been either 60.6 percent or 60.7 percent since October 2018.
So what happened? The Household survey showed a decline in the workforce of 490,000, with 646,000 exiting the workforce in April. These are numbers that routinely produce fairly significant swings. This survey is basically a phone poll, while the Establishment survey gets harder data from employers. The number of jobs added comes from the Establishment survey, which shows the 263K added jobs that BLS reports as its top-line figure. At the same time, the Household survey actually shows 103,000 fewer employed people, but the big drop in the workforce creates the lower U-3 unemployment rate.
That’s not to discount the 263,000 jobs added, which is a much more reliable figure anyway. However, it’s best not to get too excited about sudden drops in the unemployment rate unless they hold through a few months first.
Even the less-rosy aspects of the report have an upside. Hours worked declined slightly, as did average weekly aggregate earnings, although hourly earnings increased just a bit. That might mean that inflation remains in check, Bloomberg notes, calling the result a miss on wages even if the rest of the report was more of an expectations-beater:
U.S. hiring topped forecasts in April as the jobless rate dipped to a fresh 49-year low and wage gains were slightly cooler than projected, suggesting the still-healthy labor market can continue to support growth without fueling inflation. …
“It’s clearly telling you this economy is still chugging along very nicely,” Torsten Slok, chief economist at Deutsche Bank Securities, said on Bloomberg Television. “It is inflationary in the sense that wages did go up but they didn’t go up as much as we had expected.”
“Goldilocks is the best description of this,” Slok said.
Still, wages look like a good story in the longer term, analyst Charlie Bilello argued on Twitter:
US Hourly Earnings up 3.2% in the past year outpacing core inflation (YoY) for 77th consecutive month. Spread of 1.2% above inflation is highest level of expansion. #payrolls pic.twitter.com/VoZF2ID8XY
— Charlie Bilello (@charliebilello) May 3, 2019
Barron’s called it “a stunningly good jobs report,” and also pointed to the flat wage growth as a sign that that the economy wasn’t “overheating.” Reuters reported it as evidence of “solid economic growth.” As Bilello notes above, workers are still making gains on economic power if not wages explicitly.
If the White House wants an argument for re-election, this is as good as it gets — assuming it continues.
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