Friday, May 7, 2021

We’ll keep the cork on the champagne bottles for now, as fresh employment numbers from the U.S. Bureau of Labor Statistics (BLS) came in woefully light of expectations: 266K new jobs were created in the month of April, well below forecasts of 900K-1 million (with whisper numbers even higher than that). The Unemployment Rate ticked back up 10 basis points to 6.1%, when it was expected to come in at 5.8%. A major disappointment, however you slice it.

Revisions for March were also way down: 770K, down 146K from the 916K originally posted. February’s revision moved up to 536K from 468K in the last read. Still, we seem to have hit a weak spot in labor formation as the Great Reopening moves forward. Private payrolls came in at just 218K, which included a loss of 18K positions in Manufacturing for the month. Couriers and messengers dropped 77K jobs in the month. Construction was unchanged from March.

Meanwhile, job openings are at record levels. Though 400K Americans have re-entered the workforce, losses in particular areas of the economy have created slack unseen ahead of time by most of the top economists following labor market activity. The Average Work Week ticked up to a now-strong 35.0 hours, but Labor Force Participation remained flat at 61.7%.

This last metric may bring investors to the recognition that the most liberal federal government policy since the first half of the 20th century has kept able-bodied citizens on their couch instead of out looking for work. Though coronavirus cases have fallen to their lowest levels in more than half a year, there remains risk of contagion for those yet unvaccinated, especially at lower-level jobs that require person-to-person contact.

Also, while we do see Average Hourly Earnings ratchet up 0.7% from an expected -0.1%, perhaps employers haven’t yet sweetened the pot enough to get those able-bodied Americans back into the workforce. If your restaurant really needs dishwashers, perhaps you’ll need to increase what you pay prospective employees to do the job. Perhaps also we simply don’t see the amount of small businesses in existence we did 15 months ago, pre-pandemic.

Leisure & Hospitality performed reliably well, as expected, +331K jobs in the month, with the lion’s share of those going to food & drink jobs: 187K. Amusements & gaming gained 73K positions last month. Thus, overall we’re still moving in the right direction on employment — lest this shockingly low headline turn investors glum. We saw the Dow, fresh off its four-day winning streak and another record close Thursday, come way down on this news.

The Nasdaq, on the other hand, climbed 200 points — perhaps on the shift in idea that “stay at home” is not yet an antiquated concept. How long might we expect this to continue" It’s very much an open question as of this morning. That said, from investment analysts to the Fed, expectations had never been for a sprint to normalcy in the labor market; it was also supposed to take some time to get back where we need to be. It turns out this assessment was correct.

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