Maybe the spring slowdown isn’t as slow as we thought. Private-sector payrolls increased by a net 176,000 in April on a seasonally adjusted basis, or roughly in line with expectations, the Labor Department reports. In addition, March’s initially estimated 95,000 increase has been substantially revised up to a 154,000 gain. In other words, the odds still look favorable for expecting modest growth in the labor market.
Once again we have a statistical reminder that rushing to judgment over any one indicator on any one day is asking for trouble when it comes to business cycle analysis. Everyone wants answers NOW and the 24/7 news cycle demands that someone, anyone, tell us what we want to hear. Speak first and think carefully later. But there’s a reason for monitoring a diverse mix of datasets when it comes to estimating the broad macro trend. Let the publicity hungry pundits make their claims and froth up the audience, which helps publishers sell luxury cars and hair conditioning ointments. Hey, someone's got to do it. But if you’re looking for robust signals on the business cycle, with a relatively high degree of confidence that the analysis has some basis in the economy’s fundamental trend, it’s essential to take a deep breath, remain patient, and consider a holistic profile of the macro numbers in something approximating a reasonable manner. That won’t bring invitations from the usual suspects in the media, but it’ll do wonders for providing some perspective on what’s really happening in the economy vs. what the talking heads think they see lurking behind every other data release.
As for today’s release, let’s consider the numbers du jour, albeit with the standard caveat on these pages that it’s only one report and it must be considered in broader context. Then again, every thousand-mile journey begins with a first step and at the moment, that means looking at everyone’s favorite news item on this Friday.
The main takeaway is that the pace of jobs creation in the private sector, although lower relative to the high points in recent months, remains more or less middling by the standard of the last two years. More importantly, the rolling one-year percentage change for private payrolls continues to rise at roughly 1.9% to 2.0%, which implies that economic growth generally is poised for more of the same in the near term: moderate growth.
There are still plenty of risks to consider, including the ongoing struggles in the eurozone to right its ailing economy. The recent downturn in inflation expectations via the Treasuries market isn’t helpful, either. But for now, at least, there are no ominous signs in the labor market that the pace of payrolls growth is about to fall off a cliff.
Yes, today’s report could be revised away. One reason for thinking it won’t be: initial jobless claims dropped to a new five-year low last week.