The employment report was the strongest this cycle as total payroll employment expanded some 216,000. This consisted of a 230,000 gain in private payrolls and a 14,000 drop in government jobs as state and local governments are still shedding jobs. Moreover, the household survey reported a 291,000 gain in employment. The last two months private employment gains have been the strongest this cycle, exceeding the 229,000 gain in April 2010. Last months gains now appears to be the start of a new stronger trend rather than
just an offset to the weak numbers in January.
The unemployment rate fell 0.1 percentage points to 8.8%. Earlier this year it looked like signs of a stronger economy was showing up almost everywhere but the employment data.
Now the employment data is joining the other data pointing to a stronger economy. We need to remember that employment is considered to be a lagging indicator.
The improvement was also reflected in stronger hours worked as the index of aggregate hours worked rose 0.6% — the largest monthly gain this cycle.
But average hourly earnings were unchanged at $22.87 and the annual growth rate continues to slow.
The combination of expanding hours and very weak wage gains generated an increase in average weekly earnings. But the year over year increase in average weekly earnings is only
2.87% this month versus 2.98% in February. With weekly earnings only growing at under a 3% rate it is hard to see how firms can pass higher commodity prices through to consumers.
The inflation hawks seem to be ignoring the point that higher prices or inflation is most likely to generate weak consumption, not sustained higher inflation. Managers and analysts appear to be far too optimistic about firms ability to raise prices.