April 2022 Employment Report

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The Bureau of Labor Statistics‘ (BLS) establishment survey showed nonfarm employers added 428,000 jobs in April, exceeding the 400,000 expected. However, February and March employment changes were revised down by a combined 39,000 (February: -36,000; March: -3,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) was stable at 3.6%, as the change in the number of employed (-353,000) roughly matched the drop in the civilian labor force (-363,000). 

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Observations from the employment reports include:

* Once again, the correspondence between the establishment (+428,000 jobs) and household surveys (-353,000 employed) was poor.

* Goods-producing industries added 66,000 jobs; service-providers: +362,000. Job gains were widespread, with the largest gains occurring in leisure and hospitality (+78,000), manufacturing (+55,000), and in transportation and warehousing (+52,000). The only sector showing a significant job loss was the federal government (-6,000), of which 1,100 were U.S. Postal Service workers. Overall, nonfarm employment is down by 1.2 million, or 0.8 percent, from its pre-pandemic level in February 2020.

As mentioned above, manufacturing added 55,000 jobs. That result is at odds with the change in the Institute for Supply Management’s (ISM) manufacturing employment sub-index, which nearly stalled out in April. Wood products employment rose by 3,600 (ISM was unchanged); paper and paper products: +1,300 (ISM fell); construction: +2,000 (ISM increased).

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* The number of employment-age persons not in the labor force rose (+478,000) to 99.5 million; that level is 4.5 million higher than in February 2020. With the labor force contracting, the employment-population ratio (EPR) edged down to 60.0%; also, the EPR is 1.2PP below the February 2020 level. 

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* Because the civilian labor force shrank by 363,000 in April, the labor force participation rate retreated to 62.2%. Average hourly earnings of all private employees increased by $0.10 (to $31.85), and the year-over-year increase decelerated to +5.5%. For all production and nonsupervisory employees (shown above), the tale was the same: hourly wages rose by $0.10, to $27.12 (+6.4% YoY). Since the average workweek for all employees on private nonfarm payrolls was unchanged at 34.6 hours, average weekly earnings rose (+$3.46) to $1,102.01 (+4.3% YoY). With the consumer price index running at an annual rate of +8.5% in March, the average worker keeps losing purchasing power. In fact, average hourly wages have lagged CPI since April 2021; average weekly wages since June 2021.

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* Full-time jobs fell (-651,000) to 132.1 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 -- retreated by 137,000, along with those working part time for non-economic reasons (-44,000); multiple-job holders jumped by 169,000.

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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 decreased by $50.2 billion, to $254.2 billion (-16.5% MoM; +11.5% 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 9.5% 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.