Breitbart Business Digest: Payrolls Also Say No Recession Soon

Jobs Friday Points to Economic Acceleration in April

The payrolls numbers on Friday add evidence to our thesis that the economy reaccelerated in April after slowing in the prior two months.

Nonfarm payrolls increased by 253,000 in April, beating expectations for around 280,000. Private sector payrolls were forecast at 153,000 and came in at 230,000. The unemployment rate was forecast tick up to 3.6 percent from 3.5 percent. It fell to 3.4 percent, the lowest rate since 1969—beating even the Trump-era of very low unemployment.

While the April figure beat expectations, there were significant downward revisions to the prior two months. Taken together these totaled 149,000 fewer jobs in the first quarter. Over the last three months, payroll growth has averaged 222,000, down from the over 300,000 average in the first three months of 2023 prior to the revisions.

Analysts have been emphasizing that this shows some moderation in hiring activity, something also suggested by the decline in job openings. Yet 222,000 is still strong by historical standards. And the April upside surprise puts a question mark over whether the slowdown in hiring is an ongoing trend or passing economic blip.

Job growth was driven by the services sector, which expanded by 197,000 jobs. Yet even the goods producing side of the economy rebounded from March’s 17,000 decline to a gain of 33,000. Manufacturing is supposed to be leading us into a recession, but it added 11,000 jobs.

Wage Inflation Picking Up

It was not just the number of hires that surprised to the upside in March. Average hourly earnings rose by 0.5 percent month-over-month, a sharp pick up from the average of 0.3 percent in the prior three months. On a year-over-year basis, average hourly earnings were up a tenth of a point to 4.4 percent. The pick-up in wages, combined with the fall in unemployment, is a powerful signal that consumer spending can remain stronger than most analysts expect.

This is not consistent with the idea that inflation will come down to three percent any time soon—much less reach the Fed’s two percent target.

Economic Data Keeps Pushing Back Against Recession

As we pointed out on April 21, the flash read for April from S&P Global indicated on Friday that output rose at the fastest pace in 11 months. Solid growth was seen in the services sector and even the manufacturing sector.

The headline S&P Global Flash US PMI Composite Output Index rose to 53.5 in April, up from 52.3 in March. That indicates the the fastest upturn in business activity since May of last year.

The service sector purchasing managers index (PMI) rose to 53.7 in April from 52.6 in the prior month, the highest score in 12 months. The U.S. manufacturing sector PMI rose to 50.4 from 49.2 in March, the first time manufacturing has registered growth in six months.

In late April, we also said the housing market recession had either ended or at least gone into hibernation.  The S&P/Case-Shiller 20-City Composite Home Price Index rose in February. On an unadjusted basis it was up 0.2 percent. Seasonally adjusted it was up 0.1 percent, the first increase since June of last year. Wall Street economists, who have not yet caught on to the turn in the housing market, were predicting a decline of 0.3 percent.

Sales of newly built homes in the U.S. jumped to the fastest rate in a year. Homebuilder confidence has been rising for four months in a row. Confirming this expansion, construction employment rose by 15,000 in April.

The Fed Has One Job Now

The April data suggests that the Fed should be solely focused on inflation right now. It has accomplished one half of its dual mandate: maximum employment. Not only have we reached maximum employment, the jobs numbers show that employment has become sticky. Five hundred basis points of hikes have left us with a lower unemployment rate than when the Fed began.

That leaves price stability for the Fed to focus on. We think this is another factor that suggests there could be more hikes this year.