US employment grew at its fastest pace in four years in April with nonfarm payrolls (nfp) reported rising by 290k. The April nfp rise was well above market expectation of a 200k rise. Private sector growth was stronger than expected. The April unemployment report shows that the private sector increased by 231k which was the largest gain since March of 2006. Manufacturing jobs posted the largest gain in 12 years. Additionally jobs were created in the service sector and construction. Government created 59k. Temporary jobs also rose in April and Census hiring added 66k during April. The April unemployment rate rose from 9.7 to 9.9%. The rise in the April unemployment rate is attributed to more people hunting for jobs as improvement in the US economy encourages laid off workers to seek employment. Not all the April employment report was positive. Long term unemployment and the underemployment rate continued to rise. Long-term unemployment, those out of work for 27 weeks or more rose to 6.7mln. This represents a record 45.9% of the total 15.3mln unemployed in April. The underemployment rate, those who want a job but it stopped looking or those who are working part-time rose to 17.1% fromfrom  16.9% in March. 

May unemployment and nonfarm payrolls will be released on Friday, June 4th. The May unemployment rate is expected to decline by 0.1% to 9.8% and the consensus estimate for nfp is a rise of 513k. The estimates for May nfp range from 200k from 700k. The Challenger and Grey May employment report showed that job cuts were flat and back to pre recession levels. This suggests that employers are growing more confident in the recovery and are likely to begin to take on new workers. Last week's jobless claims declined by 14k to  460k. The ADP employment for May will be released Thursday along with initial jobless claims for the week ending 05/29. The ADP employment report is expected at 60k compared to 32k last month. If the ADP report comes in near consensus it would suggest the private sector crested about 150k in new jobs last month. Initial jobless claims are expected to do fall by 10k to 450k. The Challenger Gray survey coupled with anticipation of improvement in the ADP employment report and jobless claims point to continued improvement in US nonfarm payrolls growth. 

The bulk of the May nfp rise is expected to reflect a sharp increase in Census workers. We estimate that US government hired upwards of 350k to 400k new Census workers in May. When you add the Census workers to the expected increase in private sector jobs growth in May you can see why the trade expects a huge rise in May nfp growth. The impact of the May unemployment report and nfp growth may be tempered by the fact that Census workers are temporary and eventually the census gains will be subtracted as the Census is complete and the temporary Census hires are let go. The Census should be completed before year end. 

8 million jobs were lost during the recession which started at the end of December 2007. It will take many years of sustained private sector job growth to bring the unemployment rate down to pre recession levels. Some analysts prefer to look at the household employment survey and believe that it's a better indicator of labor market. The April household survey said that 1.16mln jobs were created in the first four months of 2010. If jobs growth continues at the pace noted in the household survey the US unemployment may fall faster than most analysts expect. The trade should look closely at the long term and underemployment rate in the May report. Until these rates come down the recovery in the US labor market will remain weak.

Download Report(s):

File	Description	File size
100602_Easy-Forex_Special_Report.pdf		193 Kb