Jobs Report: Payrolls, AHE Both Miss, Unemployment Rate Ticks Lower

Ok, here comes the job report.

I assume you already know what’s at stake here, but just in case, you’re reminded that it comes less than 48 hours after the May Fed statement which, pedantic debate aside, generally reinforced the prevailing narrative about inflation gradually returning to target (technically it’s on target) and the committee remaining committed to the rate path.

Today’s report also comes on the heels of PCE (alluded to above) that’s now met the Fed’s objective and last week’s ECI print, which underscored the notion that wage pressures are building.

All of that set against a backdrop of a dollar that really wants to rally some more and 10Y yields which have receded from 3% over the past two days, but still look poised to rise at the first excuse. Meanwhile, emerging markets are getting really nervous.

March payrolls were of course an egregious miss, but everyone seems to want to write that off to payback from the blockbuster February numbers.

For their part, BofAML is feeling pretty good about the prospects. To wit, from their preview:

We expect the slowdown in the pace of job growth in March to prove transitory as, in our view, it likely just reflects reversal in hiring activity following an outsized 320k increase in nonfarm payrolls in February. Moreover, recent readings of labor market indicators further support our call for solid job growth in April. For example, employment indicators from the Philly Fed and Empire State surveys remain in positive territory in April, while consumer surveys such as the Conference Board’s consumer confidence report that the labor market differential index remains near its cyclical high.

On wage growth, we expect average hourly earnings to post another solid 0.3% mom gain in April after a similar reading in March, leading the year-over-year comparison to edge up to 2.8% from 2.7%, previously.

They’re at 210k on the headline, and while Barclays (for instance), generally agrees with the notion that last month’s weakness was to a certain extent payback for the blockbuster February number, they’re only at 175K. Credit Suisse has a similar take:

We expect job gains to rebound to 175K in April after a volatile Q1. Payrolls growth slowed to 103K last month, following a multi-year high 326K gain in February. Lead indicators for the labor market have been mixed. The ISM nonmanufacturing employment index has moderated in the past few months after peaking in January, and the Conference Board “labor differential” has gone sideways in the last two reports. Overall, the labor market appears to remain strong, but we expect some moderation in job gains as the economy approaches full employment.

And here’s what Goldman thinks:

We expect a 180k increase in nonfarm payroll employment in April, slightly below consensus expectations for a 190k gain. Most labor market indicators decelerated somewhat, and we don’t expect a meaningful weather rebound (relative to trend). n Following six consecutive 4.1% readings, the unemployment rate likely fell to 4.0% in April. Average hourly earnings likely rose 0.2% in April, reflecting somewhat unfavorable calendar effects, and 2.6% over the past year.

Without further ado…

Estimates and priors

• Change in Nonfarm Payrolls, est. 192,000, prior 103,000
• Change in Private Payrolls, est. 190,000, prior 102,000
• Change in Manufact. Payrolls, est. 20,000, prior 22,000
• Unemployment Rate, est. 4.0%, prior 4.1%
• Underemployment Rate, prior 8.0%
• Average Hourly Earnings MoM, est. 0.2%, prior 0.3%
• Average Hourly Earnings YoY, est. 2.7%, prior 2.7%
• Average Weekly Hours All Employees, est. 34.5, prior 34.5
• Labor Force Participation Rate, est. 62.9%, prior 62.9%

Actual

• U.S. April Nonfarm Payrolls Rose 164k; Unemp. Rate at 3.9%
• Nonfarm payrolls, net revisions, 30k from prior two months
• Participation rate 62.8% vs prior 62.9%
• Avg. hourly earnings 0.1% m/m, est. 0.2%, prior 0.2%
  • Y/y 2.6%, prior 2.6% est. 2.7%
• Nonfarm private payrolls rose 168k vs prior 135k; est. 190k, range 140k-250k from 33 economists surveyed
• Manufacturing payrolls rose 24k after rising 22k in the prior month; economists estimated 20k, range 12k to 30k from 19 economists surveyed
• Unemployment rate 3.9% vs prior 4.1%; est. 4%, range 3.9%-4.1% from 78 economists surveyed; April rate lowest since Dec. 2000
• Underemployment rate 7.8% vs prior 8.0%
• Change in household employment 3k vs prior -37k