{"id":1519,"date":"2019-05-03T10:30:40","date_gmt":"2019-05-03T14:30:40","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1519"},"modified":"2019-05-03T10:30:40","modified_gmt":"2019-05-03T14:30:40","slug":"april-employment-report-and-nonmanufacturing-activity","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1519","title":{"rendered":"April Employment Report and NonManufacturing Activity"},"content":{"rendered":"\n

KEY DATA:<\/strong> Payrolls: +263,000;\nPrivate: +236,000; Unemployment Rate: 3.6% (down 0.2 percentage point); Hourly\nWages: +0.2%\/ ISM (NonMan.): -0.6 point; Orders: -0.9 point<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cWith job growth strong and the unemployment\nrate barely measureable, it is hard to see why the Fed would even consider\nlowering rates.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT MEANS:<\/strong> If the Fed were to cut rates, it\nwould have to see weakness in the labor market. \nWell, forget that.  Job gains in\nApril came in well above expectations.<\/em><\/strong> \nYes, the headline number was hyped by a surge in local government\nhiring, which is not likely to last.  But\nthe gains in the private sector were also robust.  Health care, social services, restaurants,\nconstruction and employment services added new workers like crazy.  On the negative side, retail keeps thinning\nits payrolls and utility employment faded.<\/em><\/strong>  Otherwise, there were few areas where firms\ncut workers.  There was one really odd\nnumber in the report.  Building and\nswelling services added almost 21,000 employees, a nearly 1% rise in just one\nmonth.  That seems way out of line.  But even excluding that likely aberration,\nthe hiring pace was still strong.   <\/p>\n\n\n\n

As for the household side of the report, the\nunemployment rate dropped to its lowest level since December 1969, near the\npeak of the Viet Nam War when draft rates sliced the labor force dramatically. <\/em><\/strong> But while the number unemployed fell, so did\nthe labor force, which inflated the decline in the unemployment rate.  The labor force numbers bounce around like\ncrazy, so don\u2019t make too much of that drop or the decline in the labor force\nparticipation rate.  Despite the strong demand for\nworkers and the low unemployment rate, wages rose moderately over the month and\nthe increase over the year continued to decelerate modestly.<\/em><\/strong><\/p>\n\n\n\n

The strong labor market is keeping the economy\ngoing, but the less than stellar income gains are keeping it from\naccelerating.  We could see that in the\nInstitute for Supply Management\u2019s April report on nonmanufacturing\nactivity.  The overall index eased and\nthe details were mixed.<\/em><\/strong>  Activity did expand faster, but\norder growth moderated and so did hiring. \nIn addition, orders books filled more slowly.  Basically, this report, when coupled with the\nmanufacturing sector numbers, points to an economy that is growing decently but\nis not shifting into the next gear.<\/p>\n\n\n\n

MARKETS AND\nFED POLICY IMPLICATIONS:<\/strong>  So\nmuch for a faltering economy that requires a kick-start from the Fed.  The labor market is in great shape yet wage\ninflation is not becoming a major threat.  <\/em><\/strong>We can thank the solid gains in\nproductivity for that.  The high level of\npayroll increases has surprised myself and most other economist but there may\nbe some special factors at work.  The\nmonthly number is a net number.  It takes\nall additions to payrolls and nets out all reductions, which includes layoffs,\ncompany closures and, here is a key, retirements.  Baby-boomers are staying in the workforce\nlonger and the labor force participation rate for those over 65 is rising not\nfalling.  Thus, the willingness to\ncontinue working is easing the pressure on firms to find new workers, which\nindeed are in short demand.  That is the\nequivalent of reducing the \u201creductions\u201d portion of the calculation, raising\npayroll gains.  That may sound somewhat\nwonky, but it makes sense, at least to me. \nIt would be awfully hard for the Fed to explain a rate cut given the\nstrong job market. So forget that. \nIndeed, this report argues more for a continuation of the normalization\nprocess than a reversal of it.  But to\nraise rates, the Fed would have to see an inflation rate well above target for\nan extended period.  So a hike is likely\noff the table for quite a while as well<\/em><\/strong>.  As for investors, strong labor markets should\nbuoy expectations that earnings can hold up, even if the Fed is not likely to start\nmainlining liquidity into the markets\u2019 veins once again.  <\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA: Payrolls: +263,000; Private: +236,000; Unemployment Rate: 3.6% (down 0.2 percentage point); Hourly Wages: +0.2%\/ ISM (NonMan.): -0.6 point; Orders: -0.9 point IN A NUTSHELL:  \u201cWith job growth strong and the unemployment rate barely measureable, it is hard to see why the Fed would even consider lowering rates.\u201d WHAT IT MEANS: If the Fed … Continue reading April Employment Report and NonManufacturing Activity<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-1519","post","type-post","status-publish","format-standard","hentry","category-economic-indicators"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1519","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1519"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1519\/revisions"}],"predecessor-version":[{"id":1520,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1519\/revisions\/1520"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1519"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1519"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1519"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}