The April jobs report fits in nicely with our forecast. We see nothing indicating a slowdown and nothing that would cause monetary policymakers additional anxiety that the economy is overheating, given their projections for the unemployment rate. The level of payrolls was about as expected in April: The 164K gain in April was soft, but that was balanced by a net upward revision to previous months’ gains of 30K. The trend remains strong, with gains averaging 208K, 198K, and 190K over the last three, six, and 12 months, respectively.
The surprise over the last couple of quarters has been the stability of the unemployment rate despite the strength in job growth. We’d retained our faith that the continued momentum in job growth would lead to a resumed decline in the unemployment rate, especially with some fiscal stimulus coming up. In April, the unemployment rate finally fell from 4.1%, where it had been for six months, to 3.9%, and the participation rate edged down a tenth. While we wouldn’t be surprised to see the unemployment rate edge up a tenth in the next report, this reading is consistent with our expectation that the unemployment rate is on a path that will take it down to 3½% in 2019.
As for wages, the story remains the same: They’ve firmed somewhat, but the upward trend remains modest. Average hourly earnings were on the soft side in this report, advancing 0.15% in April, and the 12-month change edged down to 2.6%. We don’t place much weight on the average hourly earnings data, preferring the ECI, which posted a solid gain in Q1.