The employment report disappointed with payroll growth not significantly outpacing what we typically see in the spring. Here are the five things we learned from U.S. economic data released during the week ending May 7.
The pace of hiring decelerated sharply in April. The Bureau of Labor Statistics estimates nonfarm employers added a seasonally adjusted 266,000 workers during the month, down from gains of 536,000 and 770,000 in February and March, respectively. The disappointing pace of job adds left nonfarm payrolls 8.2 million under their February 2020 peak. (For what it is worth, the payrolls grew by 1.090 million in April without the seasonal adjustments, reflecting the fact that the U.S. typically sees strong hiring every April.) Private sector employers added 218,000 workers in April, with the service sector payrolls swelling by 234,000 and the goods-producing side of the economy shedding 16,000 jobs. A bright spot in the payrolls data was with leisure/hospitality, which added 331,000 workers but where employment remained 2.8 million under its February 2020 count.
The separate survey of households has the unemployment rate inched up by 1/10th of a percentage point to 6.1 percent—it had peaked at 14.8 percent one year ago. 430,000 people entered the labor force as the participation rate grew by 2/10ths of a point to 61.7 percent (February 2020: 63.3 percent). The labor force participation rate for adults 25-54 held steady at 81.3 percent (February 2020: 82.9 percent). The median length of unemployment inched up 1/10th of a week to 19.8 weeks. The count of part-time workers seeking full-time employment (“involuntary part-time workers”) fell to a pandemic low of 5.243 million (-583,000 for the month but still 845,000 above February 2020 levels). The broadest measure of labor underutilization (the U-6 series) shrank by 3/10ths of a point to a pandemic low of 10.4 percent.
Purchasing manager continued to signal strength in manufacturing. The PMI, the headline index from the Institute for Supply Management’s Manufacturing Report on Business, lost four points in April to a reading of 60.7. Even with the decline, the PMI has remained above a reading of 50.0 (indicative of an expanding manufacturing sector) for 11 straight months. All of the contributors to the PMI pulled back in April, including new orders (off 3.7 points), production (-5.6 points), employment (-4.5 points), and inventories (-4.3 points). All 18 tracked manufacturing industries reported growth during the month, led by electrical equipment/appliances, textiles, and furniture. Survey respondents reported that “labor-market difficulties…persist.”
…and report the same for the service sector. The Services PMI—also from the Institute for Supply Management—lost a point in April to a reading of 62.7. The Services PMI has been above the expansion/contraction threshold of 50.0 for 11 months. While the employment index advanced by 1.7 points, index components for business activity/production (-6.7 points), new orders (-4.0 points), and inventories (-4.9 points) declined during the month. Seventeen of 18 tracked service sector industries expanded in April, led by arts/entertainment/recreation, wholesale trade, and companies/support services management. Survey respondents indicated that “pent-up demand is continuing.”
Trade activity rose in March, but the deficit widened to a record high. The Census Bureau and the Bureau of Economic Analysis report that exports jumped by $12.4 billion to a seasonally adjusted $200.0 billion while imports rose by $16.4 billion to $274.5 billion. The resulting trade deficit of -$74.4 billion was up $3.9 billion from February and a record for the data series. The goods deficit widened by $3.6 billion to -$91.6 billion, while the services surplus shrank by $0.3 billion to +$17.1 billion. In the case of the former, exports rose for industrial supplies/materials (including gold), capital goods, and consumer goods. At the same time, imports jumped for consumer goods (cell phones, furniture, toys/games), industrial supplies (petroleum and crude oil), capital goods (semiconductors), and automotive vehicles.
Construction spending inched up in March. The Census Bureau reports the seasonally adjusted annualized value of construction put in place increased 0.2 percent during the month to $1.513 trillion. This was 5.3 percent ahead of the year-ago pace, hampered by the opening days of the pandemic. Private construction spending grew 0.7 percent to $1.169 trillion, with residential construction rising 1.7 percent (new single-family homes: +2.0 percent) but nonresidential spending falling 0.9 percent from its February rate. Public sector construction spending fell 1.5 percent to $343.9 billion, which was down 4.6 percent from a year earlier.
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending May 1, First-Time Claims, seasonally adjusted): 498,000, -92,000 vs. the previous week, -2,286,000 vs. the same week a year earlier). 4-week moving average: 560,000 (-85.4% vs. the same week a year earlier).
- Vehicle Sales (April 2021, Autos and Light Trucks, seasonally adjusted annualized rate): 18.507 million units (vs. March 2021: 17.958 million, vs. April 2020: 13.023 million).
- Wholesale Trade (March 2021, Inventories of Merchant Wholesalers, seasonally adjusted): $693.6 billion (+1.3% vs. February 2021, +4.5% vs. March 2020).
- Senior Loan Officer Opinion Survey (April 2021)
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What We Learned About the U.S. Economy Last Week 