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Economists Give Their Take on April’s Troubling Employment Numbers

The economy added 115,000 jobs, and the unemployment rate dropped to 8.1 percent. With an upward revision of 53,000, March's payroll growth is now 154,000. Economists expected payrolls to grow by 165,000 for April. The government sector cut 15,000 jobs, and the private sector added 130,000 jobs. With these reported numbers from the ""Bureau of Labor Statistics"":http://www.bls.gov/, economists from ""IHS Global Insight"":http://www.ihs.com/index.aspx, ""Capital Economics"":http://www.capitaleconomics.com/ , and ""Fannie Mae"":http://www.fanniemae.com/portal/index.html, provided their own analysis on what the numbers really mean and what they may indicate for the future.


*Dissecting the Numbers*

""Some of the sting of the weak 115,000 increase in jobs in April was taken away by the revision that took March up to 154,000 from 120,000. But the two-month slowdown is still very clear. Job growth in March and April averaged 135,000, down from an average 252,000 per month in the three months to February. And though the unemployment rate fell in March and April, both drops reflected fewer people looking for work, not more employment.""

_Nigel Gault, Chief Economist at IHS Global Insight_

""The very modest 115,000 increase in non-farm payrolls in April will raise fears that the recovery is fading fast, just like it did at this time last year…In addition, despite a 169,000 decline in the household survey measure of employment, the unemployment rate still edged down to a three-year low of 8.1%, from 8.2%, as the labour force fell by an even bigger 342,000. The participation rate slipped from 63.8% to 63.6% last month, which is a 30-year low. Normally we would characterise the contraction in the labour force as a big negative, presumably a result of job seekers becoming so disillusioned they give up. But it is worth remembering that this is a volatile series and the labour force increased by almost 1,000,000 in the first two months of the year, so some drop back was to be expected.""

_Paul Ashworth, Chief U.S. Economist at Capital Economics_


""Nonfarm payrolls rose 115,000 in April-a six-month low. Both hours worked and average hourly earnings were flat, implying continued soft income growth. The one mildly bright note was a 53,000 upward revision of payrolls over the prior two months, resulting in the average monthly gain in the three months ending in April moderating to 176,000, from 218,000 over the three-month period ending in January....The unemployment rate dipped 0.1 percentage points to 8.1 percent, marking ten consecutive months without an increase. The seemingly good news masks the true level of distress in the market, as this month's decline in the unemployment rate was the result of a plunge in the labor force.""

_Doug Duncan, Chief Economist at Fannie Mae_

*Speculating for the Future*

""The employment deceleration in part results from warm winter weather that pulled some hiring forward, producing a payback now. For that reason we think that the March and April payroll figures understate the pace of recovery, and we look for a better but still subdued pace of job creation in the 150,000-200,000 region over the rest of the year. If that's right, the Fed probably won't be tempted to launch QE3.""

_Nigel Gault, Chief Economist at IHS Global Insight_

""We still think the true health of the labour market lies somewhere in the middle of the strength seen in the first two months of the year, when the average monthly payrolls gain was 267,000, and the weakness in the last two months, when the average gain was 135,000. Over the next couple of months we expect the monthly gains to settle back into a 150,000 to 200,000 range.""

_Paul Ashworth, Chief U.S. Economist at Capital Economics_

""If the slower pace of hiring is partly due to the payback from warm winter weather, then we may see some pickup in coming months. However, it will take some time to confirm whether this will turn out to be a temporary lull or a repeat of prior years' disappointment after a promising start.

_Doug Duncan, Chief Economist at Fannie Mae_

*Housing Market Implications*

""Overall, today's news does not provide comfort that the current environment supporting the housing market is brightening. Our April National Housing Survey, to be released on Monday, is expected to show continued gradual improvement of consumer views on housing market conditions. Whether recent improvement in sentiment will translate into a stronger market for home sales depends on near-term developments in the labor market.""

_Doug Duncan, Chief Economist at Fannie Mae_

About Author: Esther Cho


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