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So, a decent snapback in the US labor market. Net new jobs increased by 223,000 in April — matching the consensus forecast –while the unemployment rate fell by 0.1 percentage point to 5.4%, according to the Bureau of Labor Statistics. Labor force participation ticked up, making that jobless rate improvement look a bit stronger. The U-6 underemployment rate edged lower. Also, some more progress in the long-term jobless numbers.
Not so decent: The employment rate went nowhere. The March jobs number was revised lower from 126,000 to 85,000. Over the past three months, job gains have averaged 191,000 per month vs. 260,000 monthly in 2014. And, once again, weak wages: The broadest measure of average hourly earnings was up 0.1%, leaving average hourly earnings up 2.2% over the past year. Average hourly earnings for production and non-supervisory workers were up 0.1% and 1.9% year over year. (Double that rate would be nice.) What’s more, the US may still have a 3-6 million “jobs gap.”
Like I said, decent but not dynamic. And hardly the year of economic acceleration many were predicting/hoping heading into 2015. But the numbers do greatly reduce fears that weak first-quarter GDP — which may have been down nearly 1% — is an omen of darker things to come.
It’s also worth noting the growing skepticism about the predictive powers of the GDP report, as it relates to jobs. In a recent note, JPMorgan economist Jesse Edgerton point out that since the early 2000s, “GDP’s ability to forecast payrolls growth has dropped dramatically. In the last 10 years of data (excluding the recession), first print GDP growth is actually slightly negatively correlated with payroll growth in the next quarter. … [And where] GDP was once better than payrolls at forecasting next quarter’s change in the unemployment rate, GDP’s forecasting power has dropped essentially to zero in recent years. … Payrolls, private domestic final purchases, and overyear-ago GDP growth all perform better in real time. With these indicators less weak, we remain comfortable with our forecast for a tightening labor market.”
Maybe so, but the “new normal”/“average is over” economy of so-so GDP growth (shaping up to be another 2%ish year), OK job growth, and stagnant wages continues. Of course, maybe we are getting the GDP numbers all wrong and growth/productivity are stronger than they appear. Then things are even weirder. Even so, policymakers should be focused on pro-growth policies from taxes to regulation to immigration to education to infrastructure to income support. Faster, please …