KEY DATA: HWOL: +195,600/ Pending Sales (Over-Month): -1.3%; Over-Year: -3.3%

IN A NUTSHELL: “The decline in pending home sales is another sign that the housing market is slowing.”

WHAT IT MEANS: For well over a year, firms cut back on their advertising for open positions. That pattern changed in February and the Conference Board’s measure of online want ads has now increased for three consecutive months. The increases were spread across the entire country with forty-eight of the fifty-two metro areas surveyed posting gains. All twenty of the largest areas were up. Similarly, the rising demand for labor was seen in most occupations as all ten of the largest categories experienced increases. If the job gains are slowing down, and we will know better about that on Friday, it is likely because of a shortage of qualified workers rather than weakening demand.

Another day, another sign of issues in the housing market. Pending home sales, which are signed contracts, fell in April. That was the second consecutive month that the National Association of Realtors leading indicator of sales declined. The pace of purchases has also dropped from one year ago, not a positive sign for the market. Looking across the nation, three of the four regions were down in April, with only the West showing a rise. Over the year, every region was in the red.

MARKETS AND FED POLICY IMPLICATIONS: Friday we get the employment report and today’s data, which are really second level numbers, shouldn’t make much of difference to investors or even the Fed. It is interesting that my estimate of about 140,000 new jobs being created in May (consensus is 185,000) is viewed as being disappointing. In reality, it is enough, over time, to keep the unemployment rate declining slowly. The 225,000 per month level that so many are clamoring for would create real problems for the economy. At that pace, given the growth in the labor force, the unemployment rate would be at or below 4% by the end of next year. Since 1980, the rate has been that low just five times and all came in 2000. There hasn’t been an unemployment rate below 3.8% in nearly fifty years – during the Viet Nam War era. We would be entering uncharted waters for the modern economy and anyone who thinks that a labor market bubble couldn’t form is well, probably is a former Fed Chair (Greenspan and Bernanke failed to understand the implications of the tech and housing booms). So let’s hope that we get moderate job gains, even if they disappoint some, because there is only so far the unemployment rate can drop before big problems start appearing. And by the time we see the whites of the problems’ eyes, it will be too late.