New Jobs and Wages Rise Less Than Expected in April

A weaker than expected employment report this morning, with only 88k new jobs created (consensus 100k), and the unemployment rate rising to 4.5% (as expected). This was the slowest pace of job growth in over two years. Weekly hours worked fell a tenth to 33.8 (as expected), but earnings grew slower than anticipated, gaining +.2% MoM and 3.7% YoY.

Of the 88k new jobs created, 63k were in the private sector, and the government added a trend like 25k. The service area (banking, insurance, restaurants, and retailers) continues to be the area producing the new jobs, adding 116k last month, but it was the smallest monthly increase since last June. Education showed a healthy increase of 53k, as did business services(+24k MoM) and hospitality (+22k MoM). Retailers shed 26k jobs.

Manufacturing jobs remain under pressure. Manufacturing lost 19k positions (similar to last month's -18k change), goods-producing shed 28k, and construction jobs fell 11k, after rising an unexpected 50k the previous month. The financial sector also saw job losses for the first time in a long time, losing 11k employees.

Due to the shorter work week, weekly earnings fell -.1% MoM to $583. The +3.4% YoY gain in weekly earnings is the lowest gain in the past six months. Manufacturing hours worked also declined a tenth, to 41.1 hours a week in April, as overtime fell to 4.2 from 4.3 hours.

Revisions to prior months reduced jobs created by 26k. Over the past year, revisions have tended to add jobs, not subtract them. The percentage of industries hiring last month fell to the lowest level since October 2005, at 53.4%.

The cooling economy, with GDP growing at less than 2%, has economists estimating that the unemployment rate will gradually rise toward 5% later this year. The increase in the unemployment rate would have been larger this month, except that the size of the labor force fell. Moderating wage pressures likely to ease the Fed's concerns about wage inflation. The Fed is likely to remain on hold.