The April Employment Report should not budge the Fed from its "patient" monetary policy stance. While job growth and labor market conditions strengthened, wage inflation remained contained.
Despite the strong Payroll gain, there are signs in the Report that economic activity had a slow start to Q219. Total Hours Worked dipped in April, as a result of a lower Average Workweek. Bad weather in the survey week, however, could have been responsible, as the weakness was primarily in the construction sector. A weather drag on the Workweek should reverse in May and June.
The +263k m/m increase in Nonfarm Payrolls, indeed, points to a strengthening in construction jobs. They climbed 33k m/m in April, after being flat over Q119. Residential construction remains subdued, however, as the job growth was in the nonresidential construction area. Manufacturing is still in the doldrums. Jobs in that sector rose 5k after -5k in March, but the increase is well below the double digit gains seen in 2017 and 2018.
The decline in the Unemployment Rate to 3.6% attests to the above-trend growth in overall Payrolls. While both Labor Force and Civilian Employment fell in April, this could have reflected the small sample bias of the Household Survey. This bias is eliminated in the calculation of the Unemployment Rate.
The tame 0.2% m/m in Average Hourly Earnings shows no inflationary pressure from the tighter labor market. The y/y slipped to 3.2% from 3.3% in March. Calendar considerations could have contributed to holding AHE down. They should work to do so again in May. A 0.2% m/m increase in May AHE would lower the y/y further to 3.1%.
Looking ahead to the May Employment Report, early evidence suggests a smaller gain in Payrolls, as well. The Claims data will be the key.
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