Friday, May 2, 2014

Impressive April NFP, but labor force shrank by 800K+ ...

Today's NFP change came in at 288K, above our 250K estimate and certainly above the 215K consensus.  As usual, those experts lowball just to make sure the official number is a good one.  Unemployment rate fell to 6.3% from 6.7% but mainly due to significantly lower participation rate.  Although the market was volatile throughout the day, the S&P 500 didn't close higher even after the better-than-expected numbers.  It closed down 2.54, or 0.13%.  

Net change in NFP was actually better than the 288K, given BLS' total 36K upward revision of the Feb. and March figures.  The private side grew by 273K while government jobs increased by 15K.  The seasonal businesses added the most jobs as we are approaching summer.
  • Increase in government jobs was driven by local government jobs.  We think many local governments are trying to 'clean up' a bit as we are approaching the mid-term elections. 
  • On the seasonal side, wholesale trade jobs went up by 15.7K, led by 12.6K increase in non-durable goods and electronics markets jobs.  
  • Retail jobs jumped by 34.5K, led by jobs in clothing and clothing accessories stores, which increased by 10.5K.  
  • Leisure and hospitality jobs jumped by 28K, mainly due to a 32.6K increase in restaurant jobs.  
  • Another example of seasonal increase was the 11K jump in construction jobs, especially now that the famous 'weather factor' appears to be disappearing.  Along with that, we saw an 8.1K increase in real estate services jobs.
  • Transportation related jobs went up by 11.3K.  
  • Professional and business services increased by 75K, led by a 37.6K increase in administrative jobs.  That was due mainly to 24K jobs in temp help services.
  • Jobs related to manufacturing durable goods grew by 11K, led by motor vehicles and parts, machinery, and fabricated metal products.  This could indicate expectations of higher capex during the next few months.  Non-durables manufacturing jobs grew by only 1K. 
  • Jobs related to financial activities and information technology were not as strong.  In fact, information jobs declined by 6K.  

Regarding the participation rate, the labor force shrank by 806K, which brought down the participation rate by 40bps to 62.8%.  While these figures are concerning, we note that the U-6 unemployment rate declined by 40bps, matching the decline in the U-3, or the 'official' unemployment rate.  We aren't ignoring the lower participation rate, but it appears that job growth, although at a modest rate, continues.

Some are saying that the low participation rate could be due to people that work in seasonal businesses have not yet started looking for jobs.  In our opinion, the strong increase in seasonal jobs pretty much shuts down that argument.  Of course, when the long-term unemployed see the good NFP figures, they might begin looking for jobs again, no matter what they specialize in.  Then again, taking all upward revisions into account, NFP change has been pretty positive during the last few months, even with the 'weather' factor being ever-present.   

People employed part-time for economic reasons increased by 54K, which is not necessarily good news.  This has been going on for a while.  Historically, during recoveries temp and part-time jobs increased first followed by much stronger overall job growth.  We have not seen much of this during the 5+ recovery years.  

But in terms of length of time being unemployed, those figures dropped for all time ranges.  In addition, unemployment rates dropped across all age groups, and among whites, blacks, and Hispanics.  Surprisingly, the always-low unemployment rate of Asians did not change in April. 

What is concerning is the fact that while we saw job growth, average weekly hours worked and average hourly earnings did not change.  It appears that the good job numbers are good news mainly for the ones that already make money as they are the main ones consuming discretionary products and services.  Again, the job numbers were good, as we expected, but we have not seen much 'trickle down' in a number of years; not necessarily good news. 

Manufacturing ISM

Thursday's ISM manufacturing for April was 54.9, below our 55.4 estimate, but above the lowballing Street's 54.3.  The 1.2 increase from the prior month was due to increases in the employment, exports, and imports sub-indexes.  We note that the new-orders sub-index did not change and the production sub-index declined by 0.2.

No comments:

Post a Comment