Payroll job growth sputtered in April, with private-sector jobs up only 171,000 and with 26,000 of downward revisions to March. The "core" jobs measure we follow (excluding construction and retailing) was up 173,000 with no revisions. Market media reaction this morning is that today's news is the first soft jobs report in quite a while. We have a different take.
I was on vacation last month when the March jobs data came out, so there were no By the Numbers comments thereon. However, I found that news to be much less salutary than did other analysts. The headline jobs data over January–March were boosted by a massive (+40,000 per month) acceleration in retailing job growth, an acceleration we found quite dubious given very disappointing retail sales numbers over the last 6 months.
Outside of retailing, job growth was actually weak in 1Q16, as seen in the blue line in the accompanying chart. Job growth was negative in goods-producing sectors (manufacturing and mining), but there were also noticeable decelerations in such service sectors as transportation/warehousing, professional/business services and education/healthcare.
So, our take is that rather than a first subpar jobs report, today's news is actually the fourth soft report in a row. Now, hold your horses, we are not trumpeting a recession. While below expectations, April job growth actually was back to 2011–13 growth trends, after below–trend growth throughout 1Q16 (as seen in the chart). And those soft service sectors listed previously actually saw some rebound in April, with logistics jobs up 11,000, professional/business services up 65,000 and education/healthcare up 54,000.
So, no, job growth is not going to zero, but it does look to be stuck on a "plane" that is a good bit slower than what we had seen over 2014 and 2015. This is quite consistent with what we are seeing from GDP (despite claims by many economists of a disconnect between GDP and jobs). In view of these trends, a recession is probably not in the works, but neither are aggressive—or even steady—rate hikes by the Federal Reserve.