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Employment continued to rise in April, although not quite at the rate of previous months – thanks to a weakening labor demand in the energy industry. Nonfarm payroll employment rose by 160,000 in April, and the unemployment rate was unchanged at 5.0%, according to the U.S. Department of Labor.  

Employment continued to rise in April, although not quite at the rate of previous months – thanks to a weakening labor demand in the energy industry. Nonfarm payroll employment rose by 160,000 in April, and the unemployment rate was unchanged at 5.0%, according to the U.S. Department of Labor. 

Wall Street to Your Street April Employment Report Article: Household vs. Establishment Survey, Data Visualization

In the past 12 months prior to April, job growth has averaged a bit more than 230,000 per month.

In addition to the increase in employment, wages increased by 0.3% compared to the previous month – an average of 8 cents an hour – while average week hours rose slightly to 34.5 hours in April, compared to 34.4 hours in March.  On a year ago basis, average hourly earnings rose 2.5% in April, while CPI-U, a measure of inflation, rose just 0.9% between March 2015 to March 2016.

Wall Street to Your Street April Employment Report Article: Total Private Average Weekly Hours for Employees, Data Visualization

The previous two months’ nonfarm payroll employment was revised down by a total of 19,000.  The leading sectors for job growth were professional and business services, health care, and financial services.

On the down side, the labor force participation rate fell in April, as did the employment-to- population ratio.

The “real” unemployment rate, which is a separate, more inclusive measure of unemployment, fell one-tenth of a point to 9.7%.i  The labor force participation rate, which had been moving up recently, dropped to 62.8% in April, which is the lowest level since January. The total labor force contracted by 362,000.

What this means for the economy

While the continuing increase in employment is a good sign for the economy, the increase in April was dampened by lay-offs in the oil, information technology and retail sectors, according to a separate report by the outplacement firm Challenger, Gray & Christmas. According to that repot, the energy sector had 19,759 job cuts in April, and has had a total of 72,660 for the year.

  • Near “full employment.” The unemployment rate of 5.0% is very close to what the Federal Reserve considers full employment. Janet Yellen, Federal Reserve Chair, has said she considers 4.8% to be full employment. 
Wall Street to Your Street April Employment Report Article: Unemployment, Data Visualization
  • Higher wages and longer work week both bode well. Although both increases were slight, they are still moving in the right direction. 
  • Initial unemployment claims have continued to drop to an extraordinarily low level– particularly when factoring in population growth.
Wall Street to Your Street April Employment Report Article: Initial Unemployment Claims, Data Visualization
  • There are still a couple of areas within the labor market that we believe have room for improvement. For instance, the number of individuals working part time who would prefer to work full time has been improving, but still has a long way to go, in our opinion.
Wall Street to Your Street April Employment Report Article: Part-Time Employment for Economic Reasons, Data Visualization
  • The number of long-term unemployed also remains at an elevated level. 
Wall Street to Your Street April Employment Report Article: Long-Term Unemployment, Data Visualization

The steady employment expansion has been one of the brightest spots of the economy in recent months, but there is still ample room for improvement in several important areas of the labor market.

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The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Thrivent Asset Management associates. Actual investment decisions made by Thrivent Asset Management will not necessarily reflect the views expressed. This information should not be considered investment advice or recommendations of any particular security, strategy or product. Past performance is not a guarantee of future results. Investment decisions should always be made based on an investor's specific financial needs, objectives, goals, time horizon, and risk tolerance.

1The nonfarm jobs number–officially the “nonfarm payrolls” number–is derived from the establishment survey, which has the larger sample size and hence the smaller margin of error. A month-to-month change of about 100,000 nonfarm payrolls is statistically significant. The unemployment figure is derived from the household survey, which also seeks to tally the number of people working in the United States. It’s the more expansive survey; unlike the employment survey it includes self-employed workers whose businesses are unincorporated, unpaid family workers, agricultural workers and private household workers. But the household survey also has a smaller sample size and larger margin of error. As measured by the household survey, the threshold for a statistically significant change in the number of people working is about 400,000.