US non-farm payrolls disappointed for a second straight month

In April, US non-farm payrolls disappointed for a second straight month. Non-farm payrolls rose only by 115 000, in April while the consensus was looking for an increase by 160 000. The previous two figures were however upwardly revised, March from 120 000 to 154 000 and February from 240 000 to 259 000. All revisions taken into account, the payrolls were marginally stronger than expected (+ 8 000),which improves the overall picture somewhat.

The breakdown shows that layoffs accelerated again in the public sector (-15 000 from -12 000) due to a 12 000 decline in jobs in the local government. Employment dropped also in the federal government (-4 000), while the state government added 1 000 jobs. Within the private sector, hiring slowed in goods-producing (14 000 from 38 000) due to a 2 000 drop in construction jobs, while employment growth slowed also in the manufacturing sector (16 000 from 41 000). The weakening was less severe in the service providing sector, where job growth slowed from 128 000 to 116 000 in April.

The number of jobs picked up in trade and transport (22 000 from -16 000) due to a rebound in retail trade (29 000 from -21 000). Hiring accelerated also in business services (62
000 from 37 000) partly due to a pick up in temporary help (21 000 from -9 000). This is an encouraging sign for the coming months as temporary help often leads the overall payrolls. Within the services sector, the deterioration was based in financials (1 000 from 14 000), education and health (23 000 from 45 000) and leisure & hospitality (12 000 from 52 000), while the information sector continued to cut jobs (-2 000 from -6 000).

The household survey, on the contrary, showed a more upbeat picture of the US labour market. The unemployment rate dropped unexpectedly, from 8.2% to 8.1% as the number of people unemployed fell by 137 000 to a total of 12.5 million. But also the civilian labour force shrank in April, by 342 000 to 154.365 million. As a result, also employment dropped (by 169 000), the second straight decline. Average weekly hours worked stayed unchanged at 34.5, while aggregate hours worked rose slightly, to 69.0 (from 59.5).

Earnings growth remains disappointingly slow, falling from 2.0% Y/Y to 1.8% Y/Y. All revisions taken into account, the report was rather close to expectations. Nevertheless, the outcome add to evidence that the November, December and January figures were probably boosted by the unusually warm weather and painted a too optimistic picture of the US labour market. Therefore, we should position ourselves for somewhat slower gains in employment in the coming months, but the recent figures are not too worrisome and at least until now are not pointing to a renewed relapse into recession, as is the case in EMU.