By Carlos Guillen
Quite encouraging and totally unexpected, the most recent government jobs data has served to invigorate investors and give them the confidence they needed to jump into equity markets, lifting the Dow Jones Industrial Average above 15,000.
According to the latest data from the Department of Labor, the unemployment rate in April was 7.5 percent, landing below the Street's consensus of 7.6 percent and declining from the 7.6 percent posted for the prior month. Clearly, the decreasing unemployment rate has brought a sigh of relief to many that were concerned that the rate would actually increase, but more encouraging was the manner in which the rate declined. The household survey showed that those employed climbed by 293,000, and those unemployed decreased by 83,000. Moreover, those not in the labor force declined by 31,000, all while employing the additional 179,000 individuals that resulted from populations growth. In essence, the jobs market was able to employ a good chunk of those considered unemployed as well as a bit of those not in the labor force, all while employing the incremental population. We should note, however, that a good portion of the increase in employment came as a result of 278,000 individuals that began working part time for economic reasons. And we should also caution that in the March quarter 1.13 million individuals moved out of the work force, with only 31, 000 joining back in April, so if those not in the labor force decide to join the work force in May, we can certainly expect to see a strong component in the direction of a higher unemployment rate.
The even more encouraging and surprising aspect of the jobs data was that non-farm payroll employment in April (derived from the establishment survey) increased by much more than expected. The report showed that the increase in non-farm payrolls was 165,000 while the Street's consensus called for a gain of 155,000, which by the way was a much larger gain than that achieved in March. And we should add that non-farm payroll additions were increased for February and March from 268,000 and 88,000 to 332,000 and 138,000, respectively; in other words an extra 114,000 jobs were added during those two months.
The non-farm private payroll gains were 176,000, also landing above economists' forecast of 166,000. This result was also higher than that presented by ADP this past Wednesday, which landed worse than Street estimates. According to ADP, 119,000 private sector jobs were gained during April, below the Street's consensus estimate calling for a gain of 155,000 jobs. The fact that the ADP figure missed expectations by such a large margin had many on the Street worried that the Department of Labor would also report a worse than expected result, but thankfully that was not the case.
In all, the unemployment data was very good. The unemployment rate decreased, driven by employment increased and unemployment declines, with a decent chunk of people moving into the work force. And non-farm payroll employment gains were higher than expected, contradicting data from ADP that showed a less than expected gain. However, there is still a rather high probability that very soon larger portions of those not in the labor force may decide to join the work force; if this happens, we can certainly expect to see the unemployment rate move higher. For now, the encouraging jobs data has served to lift the Dow above 15,000! Quite an amazing accomplishment.