April 2021 Employment Report

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The Bureau of Labor Statistics’ (BLS) establishment survey showed non-farm employers added a disappointing 266,000 jobs in April (well below consensus expectations of +1 million). “Adding insult to injury,” February and March employment changes were revised down by a combined 78,000 (February: +68,000; March: -146,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) ticked up fractionally to 6.1% as (re)entrants to the civilian labor force grew (+430,000) faster than the ranks of the employed (+328,000). 

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Observations from the employment reports include:

* Goods-producing industries lost 16,000 jobs; service-providers: +282,000. Notable job gains in leisure and hospitality (+331,000), other services (+44,000), and local government education (+31,100) were partially offset by declines in temporary help services (-111,400), and couriers and messengers (-77,400). Manufacturing contracted by 18,000 jobs. That result is somewhat consistent with the Institute for Supply Management’s (ISM) manufacturing employment sub-index, which expanded more slowly in April. Wood Products employment fell by 7,200 (ISM decreased); Paper and Paper Products: -1,600 (ISM decreased); Construction: Unchanged (ISM increased).

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* The number of employment-age persons not in the labor force fell (330,000) to 100.1 million. As a result, the employment-population ratio (EPR) ticked up to 57.9%; i.e., nearly six in 10 of the employment-age population are presently employed. 

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* Because the civilian labor force expanded by 430,000 in April, the labor force participation rate rose to 61.7%. Although average hourly earnings of all private employees increased by $0.21 (to $30.17), the year-over-year increase slumped to just +0.3%. For all production and nonsupervisory employees (shown above), the tale was much the same: hourly wages rose by $0.20, to $25.45 (+1.2% YoY). Since the average workweek for all employees on private nonfarm payrolls expanded by 0.1 hour (to 35.0 hours), average weekly earnings increased by $10.35, to $1,055.95 (+2.5% YoY). With the consumer price index running at an annual rate of +2.6% in March, those who are employed appear to be keeping up with the official inflation rate.

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* Full-time jobs rose (+358,000) to 126.2 million. Workers employed part time for economic reasons (shown in the graph above) -- e.g., slack work or business conditions, or could find only part-time work -- fell by 583,000, whereas those working part time for non-economic reasons retreated by 45,000; multiple-job holders advanced by 99,000.

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For a “sanity test” of the job numbers, we consult employment withholding taxes published by the U.S. Treasury. Although “noisy” and highly seasonal, the data show the amount withheld in April dropped by $58.6 billion, to $228.0 billion (-20.5% MoM; +24.9% YoY). To reduce some of the monthly volatility and determine broader trends, we average the most recent three months of data and estimate a percentage change from the same months in the previous year. The average of the three months ending April was 12.8% above the year-earlier average.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.