- Headline employment surged 263k in April, bringing the year-to-date average increase per month to 205k
- The unemployment rate fell to a new cycle-low 3.6% — that is the lowest since December 1969.
There was little to dislike in the April job numbers. The headline employment count is often volatile, but the 205k average per-month year-to-date gain (and 218k per month increase over the last year) is still very strong for this point in the economic cycle. The unemployment rate hit a new cycle low. The monthly dip might at first glance be attributed to the dip in labour force participation in April, but there is little evidence at this point that worker discouragement is a significant factor pushing people out of the labour force. Indeed, quite the opposite. Looking through monthly wiggles, broader measures of unemployment have fallen more quickly than the ‘official’ unemployment rate. The ‘U6’ rate (which includes discouraged workers) was unchanged from March in April but is down half a point from a year ago compared to 0.3 ppts for the unemployment rate.
Of course, the policymakers at the Federal Reserve already knew that domestic labour markets were looking solid when they moved decidedly to the sidelines in terms of future interest rate hikes. Consumer price inflation trends still look quite benign. Wage growth has been okay, but the 3.2% year-over-year rate in April is still not a pace that would be expected to generate significant upside inflation pressures. And past interest rate hikes mean that current rates are not so far off the long-run levels the Fed would normally associate with a full-employment economy. We don’t expect one more month of strong labour market data to change the Fed’s view significantly at this point – and we don’t expect any further rate hikes from the Fed through 2020 in our base-case. But it does reinforce the view that a cut is probably less-likely than is currently being priced into markets.
