Dissecting the Employment Report

Every month we wait for the jobs numbers. And every month the markets react to the numbers, but not always as you would expect. For example, this month we had a string of less than stellar economic releases, including the employment report for March. Especially concerning was the fact that first time claims for unemployment were trending upwards after hitting a four year low this winter. These weaker economic reports toned down expectations for the employment report for April. The analysts predicted an increase of 160,000, a slight improvement from the March jobs released, but weaker than the reports we witnessed for the previous three months. Lower expectations actually put us in a better position to not be disappointed. As in sales, it is always better to under-promise and over-deliver.

The report released was actually mixed, with a lower than expected increase in jobs (115,000) but with a slight unexpected decrease in the unemployment rate and an upward revision of jobs added the previous two months. This brings us back to the pause question we have been analyzing for the past several weeks. Did the warm weather stimulate the economy this past winter, borrowing some steam (excuse the pun) from springtime? Or is this pause a reaction to weakness overseas as several countries in Europe have entered a recession? One area of weakness highlighted in the report was something widely expected. All jobs creation is coming from the private sector. The government side is still contracting and this factor was expected as stimulus dollars spent earlier in the recovery period has disappeared. We expect government contraction to continue for some time, however in the long run this is necessary for a healthier long-term recovery.


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