This week, instead of my usual economic digest, I’m going to focus on the U.S. jobs picture. After all, we’ve just received not one—not two—but three separate market-moving reports on the labor market. To help you process these results, I’ve prepared a few charts to help you see where we’re headed in terms of jobs growth, jobless claims and the unemployment rate.
On Wednesday, ADP reported that only 156,000 private sector jobs were created in April, while March private payrolls were revised down by 6,000 to reflect 194,000 new jobs.
On Friday, the Labor Department announced that by its count, private and public employers added 160,000 jobs in April. This fell short of the 205,000 consensus estimate. Meanwhile, February and March payrolls were revised down by a combined 19,000.
While the two agencies do have slightly different numbers month-to-month, as you can see below, both reports follow the same general trend. Over the long run, job growth is decelerating.
Last week, initial claims for unemployment rose 17,000 to a seasonally adjusted rate of 274,000. This was just a bit higher than economists expected—the consensus forecast was 260,000. Meanwhile, the four-week moving average ticked up by 2,000 to 258,000. Notably, jobless claims have remained below the 300,000 threshold for over 60 weeks now, which indicates that layoff activity is at a healthy level. If you look at the past two year’s worth of data, you can see that there has been a downward trend in layoff activity.
And then there is the unemployment rate, which is calculated after surveying 60,000 households. This week, the Labor Department announced that the unemployment rate remained unchanged at 5.0% in April. The average workweek ticked up from 34.4 hours in March to 34.5 hours in April, in line with economists’ expectations. The chart below also shows a long-term downward trend in the unemployment rate.
The Big Picture
The jobs picture remains mixed. While payroll growth is slowing, we’re seeing improvements in terms of layoff activity and the unemployment rate. However, I must also mention that the labor force participation rate, at less than 63%, is well below pre-recession levels. My hunch is that the uncertainty in this Presidential election year is now impacting business spending and planning, so this is taking its toll on the jobs market.
Because we still aren’t seeing the jobs growth that economists have been forecasting, I expect the Fed to continue its accomodative policies. As a labor economist, Chairwoman Janet Yellen has been watching these economic reports closely, and I doubt that these results are strong enough to encourage a rate increase. So while the lack of jobs growth is troubling, there is a silver lining for the stock market, which benefits directly from the low interest rate environment.