Summary: March non-farm payrolls increase much less than expected; previous two months’ figures revised down; jobless rate ticks up, participation rate up; “a shocker”; average hourly pay up noticeably; jobs-to-population ratio inches up; underemployment rate falls closer to 10%; hourly pay growth slows to near-zero on “base effects”.
The US economy ceased producing jobs in net terms as infection controls began to be implemented in March 2020. The unemployment rate had been around 3.5% but that changed as job losses began to surge through March and April of 2020. The May 2020 non-farm employment report represented a turning point and subsequent months provided substantial employment gains. Changes in recent months have been more modest but mostly positive.
According to the US Bureau of Labor Statistics, the US economy created an additional 266,000 jobs in the non-farm sector in April. The increase was well below the 950,000 which had been generally expected earlier in the week and less than half the 770,000 jobs which had been added in March after revisions. Employment figures for February and March were revised down by a total of 78,000.
The unemployment rate ticked up from March’s rate of 6.0% to 6.1%. The total number of unemployed increased by 102,000 to 9.812 million while the total number of people who are either employed or looking for work increased by 430,000 to 160.988 million. The additional number of people in the labour force led to rise in the participation rate from March’s rate of 61.5% to 61.7%.
NAB economist Tapas Strickland described the report as a “shocker”.
US Treasury yields reacted in a mixed fashion on the day. By the close of business, the 2-year bond yield had slipped 1bp to 0.15%, the 10-year yield had inched up 1bp to 1.58% while the 30-year yield finished 4bps higher at 2.28%.
However, Strickland pointed to one part of the report “which surprised to the upside.” Average hourly earnings increased by 0.7% over the month “despite the influx of traditionally lower-paid leisure and hospitality workers.” He noted anecdotal evidence of “businesses having to pay up for labour” despite the large gap between expectations and April’s actual increase.