Labor Market Still Looking Solid


  • Nonfarm payroll jobs came in above expectations with 253 thousand new jobs vs. 180 thousand expected but revisions to the prior two months removed 149 thousand previously reported jobs. Per the Household Survey employed persons increased 139 thousand from March to April, so modest growth to be sure. The unemployment rate defied expectations by decreasing a tenth to 3.4% instead of increasing a tenth as expected as the labor force shrank 43 thousand, and the ranks of the unemployed dipped by 182  thousand. Job gains remained strong in leisure and hospitality, health care, and  professional/business services. Job losses were in retail trade and temporary help services for a second straight month. The Fed’s rate hikes are slowing the labor market but very grudgingly. Compare April’s job growth to the prior six month average gain of 290 thousand.


  • Wage gains reversed a moderating trend with the MoM gain of 0.5% beating the 0.3% expectation and March increase. The year-over-year pace increased to 4.4% vs. the prior month and expectation of 4.2% but that is still down from 4.6% in February. After dropping in the prior two months, average weekly hours remained at 34.4 hours, matching expectations. Weekly hours peaked at 35.0 hours a year ago. Typically, hours worked are cut prior to cutting jobs so the recent dip does indicate some softening on the edges, as does the dip in job openings from the this week’s JOLTs report. All things considered, however, the wage components in this report reverse some of the recent trend of moderating gains  and that will be frustrating news at the Fed.


  • The unemployment rate fell from 3.5% to 3.4%, as the labor force decreased by 43 thousand people while the ranks of the unemployed dipped by 182 thousand, as reported  in the Household Survey.  All-in-all, a decrease in the unemployment rate and the slight decrease in the labor force won’t be appreciated at the Fed, but the moves can be characterized as slight, so not likely to get the hawks too stirred up for a rate hike.


  • The slight decrease in the labor force didn’t impact the Labor Force Participation Rate which remained at 62.6%, as expected.   The participation rate a decade prior to the pandemic averaged 63.3% while the average over the past year has been 62.3%. However, the 62.6% rate in March and now April represents the highest participation since the pandemic began, and while it didn’t improve it didn’t slip back either, so kind of a push for this metric in April.


  • While the solid beat in the headline jobs number may get a lot of the press, the downward revisions to the prior two months takes some of the shine off the beat. However, the pickup in wage growth and the decrease in the  unemployment rate will cause some consternation at the Fed. Will it force a hike in June? No, but for those expecting a rate cut as early as July, they should probably revisit those assumptions because the labor market continues to show amazing resilience which plays right into the Fed’s Higher-for-Longer message.


Agency Indications — FNMA / FHLMC Callable Rates

Maturity (yrs) 2 Year 3 Year 4 Year 5 Year 10 Year 15 Year
0.25 4.76 4.51 4.48 4.50 4.73 5.20
0.50 4.75 4.48 4.42 4.39 4.59 5.08
1.00 4.74 4.45 4.39 4.35 4.50 4.96
2.00 4.44 4.33 4.27 4.38 NA
3.00 4.22 4.32 NA
4.00 4.27 NA
5.00 4.24 NA
10.00 NA

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Published: 05/05/23 Author: Thomas R. Fitzgerald