Action Economics expects a gain of 200,000 in nonfarm payrolls in April, with the jobless rate holding at 9.7 percent
Action Economics expects the U.S. employment report for April, scheduled for release on May 7, to show an increase in nonfarm payrolls of around 200,000, beating the gain of 162,000 in March. We expect another big boost from Census hiring, while the private payroll figures in the report should continue to post a slow but steady recovery from the peak declines of the recession seen in the first quarter of last year. The Census-led jobs gain should allow the unemployment rate to hold at 9.7 percent, while average hourly earnings climb by 0.1 percent and the average workweek holds at 34.0 hours. The industry mix should reveal a hefty surge in government hiring in the neighborhood of 150,000 that is led by an assumed 170,000 surge in Census hiring, alongside a modest 50,000 gain for private payrolls that would mark the fourth straight monthly increase. We will assume that the Census contribution to government employment will climb to a cumulative 570,000 by May, which is below the 635,000 estimate from the Commerce Dept. The climb to a May peak should be quickly reversed by yearend. Note that Census hirings as of March sat at a mere 87,000, vs. prior Census hiring levels of 154,000 in March 2000 and 68,000 in March 1990. Our assumption remains that the biggest monthly Census hiring boost will come in May, with a boost in the 310,000 area. Other Reports
Here is a look at some of the other reports informing our April payrolls forecast: We expect the ADP Employment survey to reveal a 30,000 April gain in private payrolls, following a 23,000 March drop that will likely be revised toward the 123,000 private payroll gain in the March jobs report, just as the ADP report's February decline of 24,000 could be revised toward the 8,000 February private payroll gain in the government report. The ADP industry breakdown should reveal a 50,000 April drop for jobs among goods producers with a flat factory figure, alongside a small 80,000 service employment gain. Other labor market indicators have tended to reinforce forecasts of a gradual job market improvement into April, with claims signaling downside risk, but with most confidence measures providing a fairly neutral signal for payrolls, and with most factory sentiment measures signaling risk to the upside. The weekly initial jobless claims figures for April provide the greatest source of downside risk for payrolls. A surge in claims through the first two weeks of April was likely attributable to a distortion from the Easter holiday, though claims have failed to drop back substantially since then, leaving no improvement since late February and little improvement over the last five months. Initial claims have an average April reading of 462,000, from 449,000 in March and prior averages of 468,000 in February and 478,000 in January. We are well below the high of 643,000 in March 2009, though above the sub-400,000 figures seen as recently as June 2008. Confidence Up
Confidence has improved modestly through April, which is presumably good news for Friday's jobs report, though the uptrend over the last two quarters has been modest at best and the levels of the various measures remain in recession territory despite the bounce from cataclysmic early-2009 lows, leaving levels that are generally in line with record lows established from before this last cycle. The April Conference Board's Consumer Confidence index bounced to 57.9 from 52.3. The Michigan sentiment index moderated to 72.2 in April from 73.6, however, and the ABC/Washington Post figures are trending back down again as well. The various factory sentiment measures suggest upside risk to Friday's jobs report, as these measures continue to establish new highs for the cycle. The employment components of the available factory sentiment reports have mostly shown ongoing improvement in recent months, and particularly in April. The employment component of the April Institute for Supply Management manufacturing survey rose to 58.5 from 55.1, while the employment component of the March ISM nonmanufacturing survey rose to 49.8 from 48.6. (The April ISM services report is scheduled for release on May 5.) Though labor market improvement likely continued into April, the pace of improvement has been slow relative to past cycles, and especially compared with the recoveries from prior large downturns. We have yet to see if growth can continue to accelerate once the inventory reversal plays itself out—likely at some point in the second quarter—or if GDP growth will stall at rates that merely sustain the current high rate of joblessness.