This morning’s update on non-farm payrolls for April brings some good news. Job growth accelerated last month to a net rise of 268,000 (seasonally adjusted) vs. March’s 231,000 gain. In fact, April’s pop was the best monthly increase in payrolls since the recession ended.
The news is all the more satisfying in the wake of Wednesday’s weak ADP jobs report and yesterday’s rising trend in jobless claims. Economists were surprised as well: the consensus forecast called for a gain of 200,000, according to Briefing.com.
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Jim O’Sullivan, chief economist at MF Global, opines that there's a fair amount of growth momentum to consider. “The recovery has progressed into the self-propelling stage, where it’s less vulnerable to short-term swings in sentiment,” he tells Bloomberg.
Perhaps, but we should be cautious with today’s jobs report for several reasons. One is that most of the surprisingly good news comes via a sharp revival in retail employment. In March, retail jobs suffered a rare retreat, dropping by a seasonally adjusted 3,200 on a net basis. The dip was temporary, however, and last month the sector added more than 57,000 positions - the biggest monthly gain by far in more than three years.
Retail jobs are certainly welcome - indeed, any job growth is good news these days. But it’s misleading to think that retail employment will bail us out at this pace for an extended period. In addition, one might wonder if retail jobs offer the same kick for economic growth vs. employment gains in other sectors, such as housing and manufacturing.
In any case, let’s not look at the gift horse in the mouth. Meantime, let’s also note that despite today’s jump in job growth, the unemployment rate ticked back up to 9.0% for April.
There's also the much-weaker household employment survey to consider. The methodology for this series is different than the more widely monitored establishment survey that's noted above. Indeed, as we discussed earlier this year, the household survey employment numbers are quite a bit more volatile vs. their counterparts derived from the establishment report. Accordingly, the two series can and do differ from month to month by more than trivial amounts. Nonetheless, no one will take comfort from learning that civilian employment via the household data dropped by a hefty 190,000 last month after posting a 291,000 net gain in March.
It seems that there's still plenty to worry about. In other words, not much has changed. The economy is still growing and the labor market is recovering, but the pace of growth isn’t enough to bring down the unemployment rate quickly. Today’s payrolls report offers another reason for thinking that the risk of a new recession is still relatively low (at least according to the establishment survey). Yet the threat of a slowing recovery from an already sluggish pace can’t be ruled out.