April Employment Report Not Good

The April decline in payrolls of 539,000 was a smaller decline than the published economist median expectation of 600,000, but still represents bad economic news.

Part of the smaller decline is explained by a 72,000 jump in government payrolls, which hardly helps the wealth-producing private sector. There, widespread losses occurred, including a drop of 149,000 in manufacturing and 110,000 in construction.

It is hard to derive a positive spin from the recent market argument that at least the rate of decline in economic data is slowing.

The increase of 0.4 to 8.9% in the unemployment rate was in-line with expectations, but also noteworthy. The 2009 Obama administration budget (ended Sept. 30, 2009) called for a $1.7 trillion deficit. The economic assumptions assumed an 8.1% average unemployment rate for 2009. That looks like a very long stretch at this time, as the rate is likely to move higher the next few months. That implies that the deficit this fiscal year will be higher than forecast.

Hourly earnings growth did not add much to consumer buying power. Hourly earnings were up $0.01 to $18.51 an hour, which is reported as a 0.1% increase.

There have been hopes recently of a steadying in consumer spending leading to a stabilization in economic trends this fall or later this year, but the data does not provide much support for that argument. These are still massive job losses and wage gains are minimal.

Granted, payroll trends do lag overall economic trends, but unless businesses start to show a willingness to hire and not just to lay off fewer people, the market may be ahead of itself in looking at the recent economic data as harbingers of much better trends.