April Job Creations a Big Disappointment

The number of job creations didn't bloom as fully as expected in April, as the Bureau of Labor Statistics (BLS) Jobs Report fell well below the million new jobs that were anticipated.

April Job Creations Far Below Estimates

The Bureau of Labor Statistics (BLS) reported that there were only 266,000 jobs created in April, which was a big disappointment and much less than the one million job creations that were expected. Making things worse were negative combined revisions to February and March, totaling 78,000 fewer jobs in those months than previously reported.

Breaking down the numbers, there were some contributing factors to the weak figures. Auto factories selectively shut down auto production in response to the lack of semis and there was no net hiring in construction, possibly due to higher costs and lack of labor. In addition, retail hiring was actually down 15,000, even with businesses reopening. Temporary help dropped a sharp 111,000 and this also contributed to the headline jobs miss. There was a positive development, however, in that 331,000 leisure and hospitality workers were hired.

Note that there are two reports within the Jobs Report and there is a fundamental difference between them. The Business Survey is where the headline job number comes from and it's based predominately on modeling.

The Household Survey, where the Unemployment Rate comes from, is done by actual phone calls to 60,000 homes. The Household Survey also has a job loss or creation component, and it showed there were only 328,000 jobs created. The Unemployment Rate actually moved in the wrong direction, increasing slightly from 6% to 6.1%. While there were only 328,000 job creations, the labor force increased by 430,000. The number of unemployed people increased by 102,000, causing the Unemployment Rate to rise slightly.

However, it's important to break down these numbers, as the true Unemployment Rate is actually higher than the headline figure. That's because people who are not able to look for work due to pandemic reasons, and who are still unemployed, are not counted. And that number equates to 2.8 million people. When we add this into the calculations, the real Unemployment Rate is 7.8%.

In addition, there has been a lingering misclassification error where people were classified absent from work for other reasons and not marked as unemployed on temporary layoff when they should have been. Without this error, the headline Unemployment Rate would have been 0.3% higher or 6.4%, while the real Unemployment Rate counting those unable to look for work due to pandemic reasons would be closer to 8%.

The all in U6 Unemployment Rate, which includes total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, improved from 10.7% to 10.4%.

Average hourly earnings were up 0.7% compared to last month and are flat year over year. Average weekly earnings, which we focus on more because it measures what people actually take home, rose 1% from last month. On a year over year basis, average weekly earnings fell from 6.7% to 2.7%, but this figure is likely skewed. Earnings spiked last April in the heart of the shutdowns as many people received hazard pay for going into work.

Private Payrolls Slightly Below Expectations

The ADP Employment Report, which measures private sector payrolls, showed that there were 742,000 jobs created in April, which was slightly lower than the 800,000 new jobs expected. However, March’s report was revised higher by 48,000 jobs, bringing the total number of job creations in March from 517,000 to 565,000.

Leisure and hospitality led the way with 237,000 new jobs. In total, the service-providing sector added 636,000 new jobs, while the goods-producing sector added 106,000 jobs. Also of note, manufacturing added 55,000 jobs and construction added 41,000.

We did see job gains across all sizes of businesses. Small businesses (1-49 employees) gained 235,000 jobs, mid-sized businesses (50-499 employees) gained 230,000 jobs, and large businesses (500 or more employees) gained 277,000 jobs.

Initial Jobless Claims Show Steady Improvement

The number of people filing for unemployment for the first time fell below 500,000, as Initial Jobless Claims decreased by 92,000 to 498,000. California (+71K), Michigan (+31K) and New York (+29K) reported the largest number of claims.

Continuing Claims, which measure people who continue to receive benefits, was little changed at 3.7 million.

Pandemic Unemployment Assistance Claims (which provide benefits to people who would not usually qualify) and Pandemic Emergency Claims (which extends benefits after regular benefits expire) decreased by a combined 330,000 people.

All in all, 16.2 million people are still receiving benefits throughout all programs, which is down 400,000 from the previous week. As the economy continues to re-open, we should see this number improve and we will likely see significant progress after Labor Day as extended benefits expire.

Home Price Appreciation Continues

CoreLogic released their Home Price Index report for March, which showed that home prices increased 2.0% from February. Prices also rose 11.3% on a year over year basis, which is up from the 10.4% annual gain reported for February.

Within the report, the hottest markets were Phoenix (+18.3%), San Diego (+14%) and Denver (12%).

CoreLogic forecasts that home prices will rise 1.1% in April, which is an increase from their smaller forecasts we've seen in previous months. For instance, CoreLogic had only forecasted a 0.5% rise in home prices in March, but prices actually appreciated 2%. On an annual basis, they're predicting that home prices will rise 3.5% in the year ahead, which is only slightly higher than the 3.2% forecast in their last report and still lower than most forecasts out there.