The April Employment Report points to a continuation of modest economic growth in Q216. While it does not take a June Fed Rate Hike off the table, it doesn't argue for one either. The Report supports Treasury yields staying low and stocks staying in a range. I would not be surprised if stocks recover their initial negative response by the end of the day or by early next week.
1. While Payrolls slowed to +160k after slightly downward-revised 200k+ gains in March and February, the pace is still solid enough to keep the Unemployment Rate on a downward trend (see point 3 below).
a. There is some reason to think Payrolls will speed up in May. Retail Jobs fell 3k m/m in April, an unwinding of the out-sized 39k jump in March. These jobs could speed up in May.
2. Total Hours Worked rose 0.4% m/m and are 1.5% (q/q, saar) above the Q116 average -- a solid start for Q216.
a. The uptick in the Nonfarm Workweek to 34.5 Hours contributed to the m/m increase in THW.
b. The Workweek is back to its trend level prior to February-March and a is a good predictor of further Payroll gains ahead.
3. The steady 5.0% Unemployment Rate hides a decline in the Rate in the second decimal place -- to 4.98% from 5.00% in March. This slight decline is consistent with job growth being above trend.
a. While Civilian Employment and Labor Force fell in April, the declines could reflect the quirks of the small sample -- which are cancelled out in the calculation of the Unemployment Rate.
b. The broader measure of labor market utilization -- U-6 -- fell to 9.7% from 9.8% in March.
c. Part-Timers for Economic Reasons also fell in April.
4. Th 0.3% m/m increase in Average Hourly Earnings is not troubling for the inflation rate. It probably was lifted in part by calendar and job composition factors.
a. The 2.5% y/y is within its recent range.
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