April Nonfarm Payrolls

Updated 25-May-11 21:12 ET


  • Nonfarm payrolls surged in April as firms added 244,000 new jobs during the month. The consensus expected payrolls to increase by only 185,000 jobs.
  • On top of the April gains, payrolls in February and March were revised up from 194,000 and 216,000, respectively, to 235,000 and 221,000.
  • Unfortunately, while firms are revealing more jobs, the number of people actually employed declined considerably in April. The unemployment rate increased from 8.8% in March to 9.0% in April. The consensus expected the unemployment rate to remain unchanged.

Key Factors

  • Even though April payroll growth greatly outperformed the consensus expectation, it is difficult to describe the gains as a surprise. Normally, payroll forecasts are based upon changes in initial and continuing claims levels. However, for the past four weeks exogenous factors have upwardly biased the jobless claims data. Therefore, there was a high probability of the consensus forecast underestimating payroll growth.
  • This is not to suggest that the gains in April should be discounted. The growth was certainly strong enough to showcase a solid improvement in the labor situation and provide evidence of a growing economy.
  • In fact, private payrolls added 268,000 jobs during the month. This was the most jobs added in one month since November 2005 when private payrolls added 304,000 jobs. The consensus expected private payrolls to increase by only 200,000.
  • Typically, the unemployment rate and payrolls move in lockstep with each other, but it is not abnormal for the surveys to move in opposite directions. When this happens, the two surveys tend to converge within a month or two.
  • It is unclear, however, if the increase in the unemployment rate this month is foreshadowing a potential weakening in payroll growth next month or if the drop in employment is corrected in May.

Big Picture

  • The labor market is recovering in a more deliberate fashion which, in turn, is helping to keep wage inflation in check. The stock market of course has fared just fine in recent months digesting that reality. That should continue to be the case, because the prevailing message is clear: labor trends are improving, but not at a fast enough pace for the Fed to take its foot off the quantitative easing pedal.

Establishment Survey
Nonfarm Payrolls 244K 221K 235K 68K 152K
  Goods-Producing 44K 37K 81K 38K 4K
    Construction 5K 2K 39K -20K -6K
    Manufacturing 29K 22K 37K 53K 11K
  Service-Providing 224K 194K 180K 56K 163K
    Retail Trade 57K -3K 0K 31K 6K
    Financial 4K 5K -1K -10K 1K
    Business 51K 86K 38K 51K 58K
       Temporary help -2K 34K 12K -1K 43K
    Education/Health 49K 33K 43K 29K 28K
    Leisure/Hospitality 46K 51K 54K -3K 17K
    Government -24K -10K -26K -26K -15K
Average Workweek 34.3 34.3 34.3 34.2 34.2
 Production Workweek 33.6 33.6 33.5 33.4 33.5
Factory Overtime 4.2 4.3 4.2 4.1 4.0
Aggregate Hours Index 0.3% 0.2% 0.5% 0.0% 0.2%
Avg Hourly Earnings 0.1% 0.2% 0.1% 0.4% 0.0%
Household Survey
Civilian Unemp. Rate 9.0% 8.8% 8.9% 9.0% 9.4%
Civilian Labor Force 15K 160K 60K -504K -260K
Civilian Employed -190K 291K 250K 117K 297K
Civilian Unemployed 205K -131K -190K -622K -556K