April Jobs Report Shows Surprising Strength

May 5th, 2017

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The U.S. job market bounced back in April after a lackluster March. Nonfarm payroll employment increased by 211,000, much higher than forecasts of 185,000, and a marked improvement over the revised 79,000 jobs added in March.

Another point of surprise was the fall in the unemployment rate, which ticked down from 4.5 percent to 4.4 percent. This is the lowest level in almost a decade. While the labor force participation rate fell slightly from 63 percent to 62.9 percent, it remains higher than this time last year. Year-over-year wage growth grew at 2.5 percent, which is steady, but marginally lower than consensus estimates of 2.7 percent.

Here are the top takeaways from the report:

Employment growth higher than expected: After a surprisingly weak March jobs report, April’s numbers were a breath of fresh air. Nonfarm payrolls increased by 211,000 from the month before, and grew 1.56 percent year-over-year. This represents a strong rebound from the previous month and may indicate that the labor market has once again found its footing.

Unemployment and underemployment improving: The unemployment rate continued to drop in April, falling from to 4.4 percent in April, from 4.5 percent in March. It is now at the lowest level in nearly a decade.  Similarly, the “underemployment” rate, which includes discouraged workers and those in part-time jobs for economic reasons, fell from 8.9 percent in March to 8.6 percent in April.  This drop in the underemployment rate is helping to narrow its gap with the unemployment rate.  At the height of the recession the gap was as high as 7.1 percent, but has now dropped to 4.2 percent.  This is a good sign that people are finding more employment options.

170505-April Jobs Report Graph

Labor force participation falls: The labor force participation rate, which is the ratio of people who are working or looking for work compared to everyone in the country who could work, dropped slightly in April, from 62.9 percent to 62.8 percent.  This measure has edged up slightly in the past year.

Wage growth stable: Wages grew at an annual rate of 2.5 percent in April, which is down slightly from the March growth rate of 2.7 percent. Wage growth continues to trend upward but still has some room to to reach optimal levels of around 4 percent.

Growth by industry: While not the largest growing industry in April, the professional and business services industry continued adding jobs at a rate of 39,000 last month. This has led to total growth of 612,000 for the sector in the last year.

The leisure and hospitality sector added 55,000 jobs in April and has added 260,000 jobs in the last year.

Employment in healthcare and social assistance increased by 37,000 in April.  Of this, the healthcare sector added 20,000 jobs.  This growth is consistent with recent months, but is lower than the longer term average growth of 32,000 per month in 2016.

The financial activities sector continues to add jobs, with a gain of 19,000 in April and total increases of 173,000 in the last year.

The natural resources and mining sector continues to recover from recent lows with an addition of 9,000 jobs in April.  Since its low in October 2016, mining has added 44,000 jobs.

The bottom line: The April jobs report showed unexpected strength in total employment growth and in unemployment. While labor force participation and wage growth were slightly lower than last month, the overall report was strong. These data points continue to lend credibility to the argument that weakness in early 2017 was only temporary and the economy is showing strength as summer approaches.

The division of Economics and Public Policy at Zions Bank informs and educates employees, clients, and the community-at-large by providing insight and analysis on issues related to local, national and global economic trends as well as federal banking policies. The primary goal of the Economic and Public Policy team is to help individuals and businesses understand important issues that can impact their daily financial decisions. For more information and analysis, please visit www.zionsbank.com/economy.

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