+164,000 Jobs: Payrolls, Hourly Earnings Miss As Unemployment Rate Hits 18 Year Low 3.9%

Is the Fed's rate-hike cycle over?

Coming into today's payrolls number, the sellside community was hoping that last month's unexpectedly poor payrolls number would prove to be a one off. It was not, and moments ago the BLS surprised with yet another poor jobs number, when it reported that in April, the US generated only 164K jobs, missing expectations of a 190K print, if modestly better than last month's upward revised 135K number (from 102K).

Total 164,000 April payrolls, compared with an average monthly gain of 191,000 over the prior 12 months, with most job gains occurring in professional and business services, manufacturing, health care, and mining.

February payrolls were revised down from +326,000 to +324,000, while March was revised up from +103,000 to
+135,000, netting a +30,000 job gains for the past two months. After revisions, job gains have averaged 208,000 over the last 3 months.

There was a silver lining: some of the miss could potentially be explained by harsher April weather, as workers who said they are unable to work due to bad weather was at 133K, nearly double the April historical average of 76k employees.

However, it wasn't just the headline payrolls number that was a disappointment: the much more closely watched average hourly earnings print also missed, rising just 0.1% M/M, below the 0.2% expected, and 2.6% Y/Y, also missing the 2.7% expected.

Specifically, the average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $26.84. Over the year, average hourly earnings have increased by 67 cents, or 2.6%.  Average weekly earnings rose a solid 2.9%, but below the 3.2% last month.

Average hourly earnings of private-sector production and nonsupervisory employees increased by 5 cents to $22.51 in April.

The average workweek for all employees was unchanged at 34.5 hours in April. In  manufacturing, the workweek increased by 0.2 hour to 41.1 hours, while overtime edged up by 0.1 hour to 3.7 hours. The average workweek for production and nonsupervisory employees increased by 0.1 hour to 33.8 hours.

The one piece of solidly good news in today's report is that the unemployment rate dropped to a new 18 year low of 3.9%, below the 4.0% expected, and down sharply from the 4.1% in March, which however was the result of a 240K drop in the labor force as the number of employed Americans (per the Household Survey) remained virtually unchanged at 155.181K

Offsetting this, the participation rate declined modestly from 62.9% to 62.8%.

Some more details from the report:

Employment in manufacturing increased by 24,000 in April. Most of the gain was in the durable goods component, with machinery adding 8,000 jobs and employment in fabricated metal products continuing to trend up (+4,000). Manufacturing employment has risen by 245,000 over the year, with about three-fourths of the growth in durable goods industries.

Health care added 24,000 jobs in April and 305,000 jobs over the year. In April, employment rose in ambulatory health care services (+17,000) and hospitals (+8,000).

In April, employment in mining increased by 8,000, with most of the gain occurring in support activities for mining (+7,000). Since a recent low in October 2016, employment in mining has risen by 86,000.

Employment changed little over the month in other major industries, including construction, wholesale trade, retail trade, transportation and warehousing, information, financial activities, leisure and hospitality, and government.