A mostly disappointing April jobs report from the Bureau of Labor Statistics on Friday, combined with recent turbulence that includes a 0.5 percent GDP estimate for the first quarter, has many wondering whether another economic slowdown is on the way.
Friday’s April 2016 Employment Situation from the BLS reported 160,000 jobs added during the month, while the unemployment rate held steady from March to April at 5.0 percent. February’s and March’s job gains were both downwardly revised by a combined 19,000 jobs, which brings the average monthly job gain for the three-month period from February through April down to 200,000.
Will the slowdown in labor market be a hindrance to growth in the housing market, or will the will the housing market boom this summer due to the amount of pent-up housing inventory being bought up?
“This weak jobs report follows tepid GDP growth in the first quarter and growing uncertainty about the future by both business and consumers,” Realtor.com Chief Economist Jonathan Smoke said. “The impact of this uncertainty on the spring and summer housing market is not clear. On the one hand, consumers must feel confident about their circumstances and future to make big investments so slowing job growth creates concern. On the other hand, this spring has already produced evidence of substantial pent-up demand rapidly buying up available inventory. If the April report turns into a true declining trend in job creation, we likely won’t see that impact in home sales until the summer.”
The good news for the April jobs summary is that average hourly earnings for employees increased by 8 cents up to $25.53, bringing the over-the-year average increase up to 2.5 percent. The average workweek also ticked up slightly by 0.1 hours up to 34.5 hours.
Also on the positive side was a decline in the U-6 unemployment rate, which is defined as the total number of unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force. The U-6 rate dropped from 9.9 percent in March down to 9.7 percent in April and has remained below 10 percent since October 2015. The post-recession peak for the U-6 unemployment rate is 17.1 percent from October to December 2009 and then reached again in April 2010.
“This weak jobs report follows tepid GDP growth in the first quarter and growing uncertainty about the future by both business and consumers.”
Jonathan Smoke, Chief Economist, Realtor.com
The low number of construction job gains in April may be a bad sign for the housing industry. Only 1,000 construction jobs were added in April, compared with an increase of 41,000 in March.
“Today’s jobs report suggests the labor market slowed, but did not falter, in April. While a weak headline job creation number and downward revisions to the past two months offer an uninspiring view of the labor market, there are some underlying positives,” Fannie Mae SVP and Chief Economist Doug Duncan said. “The pickup in the average workweek and annual wage growth are encouraging, though neither improved enough to stand up and cheer. More promising is the fall in the U-6 rate, the broadest measure of unemployment, which dropped to tie the lowest level since May 2008. While the report may or may not be the start of a weakening trend in the labor market, it supports our expectation that the Fed will not hike in June. On the housing front, the paltry gain in construction jobs is an unfortunate hiccup for a market that needs more building.”
Fannie Mae has already downwardly revised its 2016 economic forecast and now expects only one rate hike from the Fed instead of two for the rest of the year. While many analysts have stated they expect a rate hike from the Fed in June, Friday’s less-than-stellar labor market data may change that. Freddie Mac has downgraded its economic forecast for the GDP in the first quarter from 1.8 percent down to 1.1 percent.
“The labor market slowed in April as job gains and labor force growth each declined. The main area of weakness was retail trade, which had its worst month of job growth since December 2014,” said Curt Long, Chief Economist with the National Association of Federal Credit Unions (NAFCU). “On the bright side, wage growth improved during the month. This report will have little bearing on the Fed’s next rate hike decision in June, as policy makers have made it clear that threats abroad are of greater concern that the domestic economy.”
Click here to view the complete April 2016 Employment Situation from the BLS.