Nonfarm payroll way off forecasts for April

March’s nonfarm payroll revised down to 770,000 from 916,000

Nonfarm payroll figures came in well below expectations, rising by 266,000 on Friday, as the unemployment rate rose to 6.1%.

Dow Jones estimates had been for 1m new jobs to be added, in addition to an unemployment rate of 5.8%.

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A number of economists had been expecting a higher jobs figure as there were signs that the US economy was getting back on track.

Markets gave a slightly negative reaction to the announcement, in a signal that investors expect the Fed is a long way from tightening its policy.

“It certainly takes the pressure off the Fed and takes an imminent rate increase off the table,” said JJ Kinahan, chief market strategist at TD Ameritrade. “We’re not going to see inflation in wages, and we don’t have as many people employed as we thought, so we have to keep the party going.”

In further bad news, March’s original figure was revised down to 770,000 from 916,000.

“I think this is just as much about a shortage in labor supply as it is about a shortage of labor demand,” said Jason Furman, an economist at Harvard University and a former Obama administration advisor. “If you look at April, it appears that there were about 1.1 unemployed workers for every job opening. So there are a lot of jobs out there, there is just still not a lot of labor supply.”

The beaten up leisure and hospitality industry saw thee most significant hiring gains, with 311,000 extra workers added, although thee sector still has 2.9m fewer people employed than pre-pandemic.

The Bureau of Labor Statistics also confirmed that among the major worker groups, the unemployment rates for adult men (6.1%), adult women (5.6%), teenagers (12.3%), Whites (5.3%), Blacks (9.7%), Asians (5.7%), and Hispanics (7.9%) showed little or no change in April.

The report comes amid robust growth that saw gross domestic product rise at a 6.4% annualized pace in the first quarter, and as many economists see a burst of 10% or more in the second quarter.

Robert Alster, CIO at Close Brothers Asset Management commented: “Every piece of the economic puzzle was building a picture of strong recovery and thriving growth in the US, but the employment data has proved a shocking outlier. With both nonfarm payrolls and unemployment coming in much worse than expected, the combination of a rapid vaccine rollout, hefty fiscal stimulus and ultra-easy monetary policy has not yet pushed the US economy into the clear.

“What’s more, the devil is in the detail. The Fed is keen to monitor inclusive employment, to ensure that the US doesn’t fall into the ‘K-shaped’ recovery trap. By using the ‘Powell dashboard’, the Fed has made it clear that true recovery means an improvement in Black employment, wage growth for low-income workers, and labour market participation for Americans without a college education – indicators that tend to lag the broader data. For those trying to read whether Yellen’s comments on a possible rate hike are predictions or hypotheses, it is these more nuanced metrics which require a watching brief.”

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