To capture the unique nature of the April employment report consider the fact that the yield on the benchmark 10-year treasury yield remains below 2.70% in the face of the strongest month for payroll creation since January 2012. Employers added more jobs than thought in each of the prior two months. During April private companies added 273,000 positions while the government added 15,000 workers. The overall unemployment rate fell sharply to 6.3% and the lowest since September 2008.
Normally, one might expect the bond market to implode on such combination. However, the new normal carries some caveats when interpreting the report. The household report from which the unemployment rate is calculated showed overall employment fell by 73,000 while the number of unemployed slid by 733,000. The sharp drop in joblessness must therefore be taken with a pinch of salt as the cast of unemployed did not necessarily find work. They may have simply stopped looking. Proving the case is the drop in the participation rate to 62.8 from 63.2%. The underemployment rate – those working part-time but who would take permanent positions if available – also fell to 12.3 from 12.7%. Wages remained stagnant suggesting that as job creation picked-up, it did not come at the expense of a rise in the threat from rising prices.
Job gains were widespread with the professional and business segment adding 75,000 jobs and 20,000 more than the 12-month average. Food and drink services positions increased by 33,000 and exceeded the annual average pace of 28,000. Retailers added 8,000 more jobs (35,000) in April than the sector has added over the last year. Construction employment rose by 32,000 and more than two-times the average pace over the last 12 months. The government report noted the pick-up has been concentrated in the latest six months. Temporary positions also rose during April, which is often taken as a precursor to improving conditions for full-time hiring as employers test out workers before making them permanent. Overall the employment report is encouraging, yet requires more hard work from the private sector if the economy is going to pick-up its pace of growth.
Professional and construction job creation helps boost payrolls to best in 15-months