US non-farm payrolls
Commentary on the US employment report by Markit expert Chris Williamson.
“The pace of hiring in the US fell more than expected in April, adding to survey evidence that the slowing in the pace of economic growth first quarter may persist into the second quarter.
“April’s data are especially important to policymakers, who are eager to see if the slowdown in the economy in the first quarter will be only temporary. By adding to signs that economic weakness is lingering into the second quarter, these disappointing numbers greatly reduce the likelihood of the Fed hiking rates this side of the Presidential election.
“Non-farm payrolls rose by 160,000 in April, below consensus expectations of a 202,000 increase. The rise was the smallest seen for seven months. Gains for March and February were also revised down from 245,000 and 215,000 respectively to 233,000 and 208,000 to show 19,000 fewer jobs being created in the prior two months.
The unemployment rate meanwhile held at 5.0%, just above February’s eight-year low of 4.9% and confounding market expectations of a drop to 4.9%.
“While wages meanwhile rose 0.3% during the month, pushing pay up 2.5% on a year ago, that’s still a disappointingly weak rate of wage inflation given the low rate of unemployment.
“The payroll gain was driven almost entirely by services. Manufacturing added just 4,000 jobs, the mining headcount cull continued with an 8,000 loss of jobs, the retail sector shed 3,100 staff and construction added just 1,000 workers.
“The increase in employment was exactly in line with Markit’s PMI surveys, which also provide colour as to why hiring has waned. Survey participants report that hiring has slowed in response to disappointing order book inflows and heightened uncertainty about the economic and political outlooks. In the manufacturing sector, the strength of the dollar has compounded these worries. With these concerns showing no signs of abating in April, and election uncertainty intensifying, it would be surprising if the hiring trend didn’t slow further in coming months.
“The PMI surveys had also indicated that the economy slowed sharply in the first quarter with only a very modest upturn in April, casting doubt on expectations that the first quarter slowdown will prove temporary.”