Employment Report No Cause for Panic
Despite the roller-coaster ride of recent months, the job market is on a slow but steady climb, writes Morningstar's Bob Johnson.
While investors focused on April's employment report and cried, I was looking at a lot of other data that points to better days ahead. Auto sales hit their second-best month of the entire recovery, the PMI that everyone had been fretting over hit its highest level in 12 months, weekly initial unemployment claims posted a meaningful drop, and weekly retail sales growth is now approaching the 4% mark again.
In fairness, to the untrained eye, a fall in employment growth looks dismal at just 115,000 jobs added in April versus a recovery high of 275,000 in January. Economists reached for their handy rulers (their favorite piece of fancy equipment) and reasoned that if job growth decelerated by 160,000 in three months and the current job growth rate was 115,000, it was only a matter of another two or three months before the remaining 115,000 would be lost. Weather, the auto industry, and seasonal factors are playing havoc with this data set, especially the month-to-month data. The report looks a lot less confusing if the data is examined on a year-over-year basis. Unfortunately, that same analysis suggests that January's 275,000 jobs were probably a bit of a mirage and the economy is more likely to settle into a pattern of job growth of 150,000-220,000 for the rest of the year. Far from Panic City, but no boom, either.