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BETTER THAN BAD: AN APRIL EMPLOYMENT REPORT DEEP DIVE

The April employment report was simultaneously lackluster and stronger than expected, suggesting a labor market that's neither softening nor booming.

The U.S. economy added 115,000 jobs last month, USNFAR=ECI, a 37.8% drop from March's upwardly revised 185,000 gain and 53,000 more than analysts expected.

This marks the fourth upside surprise in the past 12 months, and only the third reading to land north of the 100,000 mark over the same time period.

Digging beneath the headline, the services sector was responsible for 91.9% of the 123,000 private sector job adds, while the manufacturing sector unexpectedly shed 2,000 workers, in defiance of the predicted 5,000 gain. Government payrolls shrank by 8,000.

All told, however, the report appears to pound a nail in the coffin of any lingering hopes for a rate cut from Warsh & Co this year.

"Job growth remains low relative to economic growth, but unemployment was unchanged from last month," said Scott Helfstein, head of investment strategy at Global X. "This is the low-hire, low-fire economy in action."

Speaking of which, the report also gave markets their first glimpse of April inflation, showing average hourly wages rose by 0.2% on a monthly basis, a repeat of the March reading and cooler than the 0.3% consensus.

Year-over-year, wages increased 3.6%, or 0.2 percentage points below economist forecasts.

"The fact that hourly wages came in at 0.2% is good news in terms of inflation," Peter Cardillo, chief market economist at Spartan Capital Securities, tells Reuters. "(The report) means that the Fed has to concentrate on inflation and not necessarily on the jobs market."

The jobless rate USUNR=ECI held firm at 4.3%, while the labor market participation rate continued to deteriorate, shaving off 0.1 percentage points to 61.8%, the lowest reading since October 2021.

Ordinarily when the participation rate drops, it puts downward pressure on the unemployment rate, because when Americans leave the labor pool they are no longer considered part of the workforce.

But beneath the surface, because of rounding to the nearest tenth of a percent, the opposite happened.

"The stability of the rounded unemployment rate in March obscures a near-0.1 percentage point gain in the unrounded number, to 4.34%, from 4.26% in March, and an uptick in the broader U-6 unemployment rate to a four-month high of 8.2%, from 8.0%, mostly due to a sizeable increase in the number of people working part-time for economic reasons," says Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics.

The average unemployment duration ticked up to 26.2 weeks, or 1.3 weeks longer than a year ago. But despite the growing amount of time it takes laid-off workers to find new gigs, labor market confidence has started to improve from dour to merely awful:

Broken down by race and ethnicity, among White, Black, Hispanic and Asian workers, only Asian unemployment lessened. White joblessness edged up 0.1 percentage point to 3.7%, but still well south of the headline figure. Unemployment among Black workers increased 0.2 pps to 7.3%.

Taken together, the White/Black jobless gap widened to 3.6 pps.

(Stephen Culp)

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