PrintMore evidence for the “snowdown” thesis is in. The unexpectedly strong April employment report, with a gain of 288,000 jobs, surprised pretty much everyone, and shows that hiring has come back in a big way after the weak first quarter. Even more encouraging are the upward revisions to first-quarter job growth, with 36,000 more jobs created than were initially reported.
The headline number was great. Of those jobs, private employment was up to 273,000 from 202,000, while government employment returned to a positive 12,000 after being largely negative for years. If this significant shift continues, employment could climb even further above the relatively low levels of the past couple of years.
The strong gain led to a decline in the unemployment rate, from 6.7 percent to 6.3 percent. The underemployment rate, which is a better indicator of the labor market as a whole, also dropped by the same amount, from 12.7 percent to 12.3 percent. Overall, very positive.
As always, though, it pays to look deeper into the data, and some of the details aren’t as encouraging. Average hourly wages were flat for the month, while the year-on-year wage growth number ticked down a bit, to 1.9 percent. (All the new workers aren’t getting much of a raise.) One of the reasons the unemployment rate dropped so much was that over 800,000 people reportedly left the labor force, which more than reverses the 500,000 gain in March and may suggest a lack of confidence.
Even given these caveats, though, the report was quite good overall. The drop in the labor force, for example, coincides with an increase in retirements and only partially erases the gain of 1.5 million over the previous six months. While wages remained the same, the average hours worked figure stayed at high levels, suggesting that labor demand remains high and that job gains are likely to continue.
This is exactly the acceleration of the recovery that I’ve been talking about, and it’s something of a relief to see the incoming data support that idea. The snowdown could have begun to destroy confidence, but clearly it hasn’t. I expect the recovery to continue, and, as the newly employed start to spend, even accelerate more.
