While unemployment continued declining in the new jobs report, slow wage growth points to an overall tighter labor market.
The Labor Department released its April jobs report today and the response has been somewhat neutral, as limited gains tell the story of an economy struggling to find sure footing.
In terms of overall employment, April saw job gains break the 200,000 mark at 223,000 new jobs, bouncing back from a sub-par March, but stagnant wages present a persistent challenge to a full recovery.
Below we’ve highlighted the reports’ most important details:
1. Unemployment Inches to Seven Year Low – In part to a boost in employment, unemployment fell to its lowest level since May 2008, reaching 5.4 percent last month – equating to 8.5 million unemployed persons. While persons unemployed for less than five weeks jumped by 241,000 – nearly 20,000 more than the number of jobs gained – longer-term unemployment has conversely decreased by nearly 890,000 over the last 12 months.
2. Construction Beats Energy – One of the biggest gains this month was to construction employment, which rose by 45,000 after a stifled March. In the last year, construction employment has increased by 280,000, running parallel to increasing in residential construction spending and a demand for building. However, while construction flourished, the nation’s energy market, following the recent crash in oil prices, continued falling, dropping nearly 15,000 oil driller and coal miner jobs, among other energy sector positions. The dips in energy employment were felt most heavily in oil producing markets, like Texas (particularly Houston).
3. Wages Rise, Barely – The Labor Department reported a slight $0.03 rise to nonfarm payrolls from March and a 2.2 percent increase since the same time last year, but the increases barely outpaced inflation, and as we’ve reported in the past, the rate of appreciation falls well short of home price gains, which limit the positive impact of such gains.
March Labeled an “Aberration”
Doug Duncan, chief economist with Fannie Mae, remarked that the report not only demonstrated that the “weak hiring in March was an aberration,” but also that gains to construction employment support the view that weather will boost employment in this quarter.
“The strengthening in overall hiring is in line with our forecast for a moderate rebound in economic activity, though not quite the bounce-back we saw a year ago, as the economy is facing more than just transitory headwinds,” he said. “With today’s report, we are comfortable with our call for a September liftoff in the Federal Funds Rate.”
Duncan went on to address the slow crawl of wages, saying that the despite muted gains, accelerating growth in broader measures – pointing specifically to the Employment Cost Index and the declining unemployment rate – suggest a “tighter labor market” overall.