U.S. Payroll Gains Return to Trend

The private sector created a surprisingly high number of jobs last month, the Labor Department reports. Private payrolls increased 273,000, or well above the consensus forecast of 213,000 (according to Econoday.com) and substantially higher than March’s revised 202,000 advance. It’s good news, of course, but today’s upbeat release is primarily a clue for thinking that the labor market is again growing at the trend rate that prevailed before the harsh winter took a toll.

Yet let’s recognize the temptation to argue that the rate of growth in payrolls is accelerating. It’s an alluring idea…again. But it’s also premature… again, until (or if) we see similiar levels of improvement in the next several updates. Meantime, nothing much has changed in terms of the big picture. In fact, that’s the good news to focus on. Private payrolls increased by nearly 2.1% for the year through April, or slightly faster than the annual growth rates of the last several months. Arguing that the latest numbers reflect a significant upswing in job creation, however, is a stretch, at least for now.


But it’s also true that what we didn’t see is significant. Payrolls didn’t fall off a cliff; the economy’s growth engine, today’s data suggests, picked up a bit, which is to say that the recent slowdown was primarily about seasonal volatility.

If we’re fishing around for interpretations that will stand the test of time, today’s news looks like a convincing clue for assuming that the economy will continue to expand at a moderate rate. In fact, that’s what the steady ~2% year-over-year rise in private payrolls has been telling us all along. The monthly change may look like a “spring stunner”. But there’s a lot less drama here than the headlines suggest.

The best we can say at this point is that the modest healing rolls on. Indeed, that’sthe upgrade for the macro outlook: we’re not sliding into a cyclical ditch. In fact, we never were, even during the darkest days of the economic news of recent vintage.

When you study the business cycle closely, it becomes clear that convincing signs of major trend changes are the exception. By contrast, if you spend a lot of time reading the economic updates, one at a time, without any context, it seems that the economy’s on the cusp of a new era every 20 minutes.

This piece is cross-posted from The Capital Spectator with permission.