May 07, 2021 | 09:19
U.S. Nonfarm Payrolls (April) — Swing and a Miss
Key takeaway: Normally, a 266,000 increase in payrolls would be celebrated, but not when a million were expected given the numerous tailwinds for hiring...but there's one big headwind, apparently, lack of available workers.
Not only did nonfarm payrolls rise about one quarter of expectations, the combined prior two-month gain was knocked down by 78k. This leaves payrolls a whopping 8.2 million below pre-pandemic levels (or -5.4%). The disappointing April gain came despite a 48k increase in government jobs (largely local education) and a 331k advance in leisure and hospitality (more than half at reopening restaurants and bars). Entertainment and hotels also gained jobs as the newly-vaccinated are looking to make up for lost time. These increases were tempered by an 18k decline in manufacturing and big losses for temporary help services and delivery companies. This speaks to the growing challenges in finding workers to fill positions due to health fears, child-care duties and even the expanded UI benefits. All those anecdotes from business surveys are now showing up in the hard data, suggesting that supply bottlenecks in labour and product markets are likely the bigger risk to the expansion than a shortfall in demand.
The household survey printed 328k positions, down from 609k the prior month. A two-tenths upturn in the (still-low) participation rate sent the unemployment rate up a tick to 6.1%. The more comprehensive U6 measure of joblessness fell to 10.4%, however, as more involuntary part-time workers had their hours extended. Still, this left the number of unemployed at 9.8 million, with 3.5 million workers reporting permanent job losses, up 2.2 million since the start of the pandemic.
Aggregate work hours rose a less than expected 0.5% in April, taking the annualized rate to 5.0% above the Q1 level. We will need to see a hearty gain in productivity (which is clearly possible with companies ramping up robot purchases) to see 8.5% annualized GDP growth in Q2.
Average hourly earnings popped 0.7% higher in the month, though this still chopped the yearly rate to 0.3% from 4.2% in March. Other wage measures, however, such as hourly compensation and the ECI, are starting to trend higher, again reflecting broadening labour shortages despite the still-high jobless rate.
Our jobs report scorecard gives the April release a 66.2 grade, not bad but down from recent months. And just not good enough when there are still nearly 10 million unemployed.
Today's misfire of a jobs report fits with the Fed's thinking that the road back to normality for labour markets could be a long one, warranting an extremely patient approach to removing stimulus.