FOREX TRADING

In the midst of a looming sovereign debt crisis, the US will offer us some insight into the status of the labour market. Reports out of the US of late have generally been positive, but we only expect a mild improvement in the labour market in April. We estimate that 170,000 payrolls were added to the economy while the unemployment rate will yet again remain unchanged at 9.7%

Businesses are hiring again

The private sector finally appears to add jobs on a regular basis. According to the ADP report, the economy has now created more jobs than it has destroyed for three months straight. Following some – for ADP – fairly large revisions, the company now estimates that February with its raging blizzards actually created 3,000 jobs on net. The numbers for March and April were revised to 19,000 and 32,000, respectively. The gains are of course modest, but they do signal that the private sector has slowly recovered to the point where employers dare hire again – even if much hiring is still only on a temporary basis.

Jobless claims have ticked down over the last three weeks. Nevertheless jobless claims do not point toward better payrolls. The Bureau of Labor Statistics conducts its payrolls survey in the week containing the 12th in each month and if you compare that week in April to its March equivalent they are practically the same (slightly worse, actually). In addition, the ADP report showed that small businesses are still not confident enough of the recovery to hire people. Small businesses are traditionally very important for job creation in the US, but the report shows – just like the Small Business Optimism Index – that these companies are still struggling just to make ends meet.

Census workers still in demand

Census hiring surprised to the downside in March contributing only 48,000 to total payrolls; much lower than we had expected. Census hiring normally peaks in May and we expect another 80,000 to be added to payrolls in April. This is much above the 28,000 added in 2000, but somewhat less than the 85,000 added in 1990.

When we consider our model’s call for a change of 90,000 in payrolls and adjust for expected Census jobs we land at 170,000 additional payrolls in April. In terms of the unemployment rate this translates into a fourth straight month with the rate at 9.7%. The increase in payrolls will not be big enough for the unemployment rate to tick down a notch to 9.6%. Surely Census hiring has the potential to greatly influence the headline payroll number (and unemployment rate), but that should not distract from the actual state of the labour market. It is going in the right direction, but only ever so slowly.

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