April 2023 Employment Report

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The Bureau of Labor Statistics’ (BLS) establishment survey showed nonfarm employers adding 253,000 jobs in April (178,000 expected). February and March employment changes were revised down by a combined 149,000 (February: -78,000; March: -71,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) ticked lower, to 3.4%, as the labor force shrank (-43,000) but more people found work (+139,000). 

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Observations from the employment reports include:

* The two surveys were directionally consistent, but job gains significantly outpaced the number of workers who found employment.

* Goods-producing industries gained 33,000 jobs; service providers: +220,000. Employment continued to trend up in professional and business services (+43,000), health care (+36,000), leisure and hospitality (+31,000), and social assistance (+24,600). Total nonfarm employment (155.6 million) is now 3.3 million jobs above its pre-pandemic level in February 2020 (private sector: +3.6 million; public sector: -301,000). That said, employment is also perhaps 5.6 million below its potential if accounting for growth in the working-age population since January 2006.

Manufacturing added 11,000 jobs. That result is consistent with the change in the Institute for Supply Management’s (ISM) manufacturing employment subindex, which barely broke back into expansion in April. Wood products manufacturing lost 1,400 (ISM was unchanged); paper manufacturing: -2,700 (ISM rose); construction: +15,000 (ISM rose).

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* The number of employment-age persons not in the labor force rose (+214,000) to 99.7 million; that level is 4.6 million higher than in February 2020. Although the number of employed rose by 139,000, the employment-population ratio (EPR) was unchanged at 60.4%, which is still 0.7PP below its February 2020 level. 

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* With the working-age civilian population growing by 171,000 and labor force shrinking by 43,000, the labor force participation rate remained at 62.6%. Average hourly earnings of all private employees nudged up by $0.16 (to $33.36), and the year-over-year increase accelerated to +4.4% (+5.1% on a not-seasonally adjusted basis). Because the average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours, average weekly earnings edged up (+$5.50) to $1,147.58 (+6.1% YoY). With the consumer price index running at an annual rate of +5.0% in March, the average worker may have gained a modicum of purchasing power. In fact, average hourly wages had lagged CPI since April 2021; average weekly wages since June 2021.

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* Full-time jobs rose (+161,000) to 134.5 million; there are now 3.7 million more full-time jobs than in February 2020. For perspective, however, the non-institutional working-age civilian population has risen by over 6.8 million during that period. 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 199,000, while those working part time for non-economic reasons jumped (+363,000); multiple-job holders: -272,000. 

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For a “sanity test” of the job numbers, we consult employment withholding/FICA taxes published by the U.S. Treasury. Although “noisy” and highly seasonal, the data show the amount withheld in April fell by $75.6 billion, to $237.2 billion (-24.2% MoM; -6.7% 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 1.1% below 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.