The April labour market report shows a strong headline U.S. labour market number, but major revisions cloud the significance of these numbers.

Nonfarm payrolls rose 253,000 versus the consensus of 185,000, but downward revisions in recent months netted 149,000 and were spread fairly evenly between February and March.

Private payrolls rose 230k versus the consensus of 160k, but this „success” was completely offset by a downward revision of 66k for March (123k versus 189k initially reported).

The details show that April was another solid month for private education and health services employment (+77k). This sector has been the strongest driver of employment growth over the past six months, averaging about 80k per month.

Public services were again very stable (+23k), while professional and business services also did well with a 43k increase, while manufacturing and construction added jobs after a decline in employment the previous month.

Temporary help employment fell by 23k, marking the third consecutive monthly decline.

Wages and salaries fared better, with average hourly wages rising 0.5% from the previous month, rather than the 0.3% increase expected, bringing the annual rate of growth in wages and salaries to 4.4% from 4.3%.

This comes on the heels of three consecutive monthly wage gains of 0.3% and will make some of the hawkish members of the Federal Open Market Committee (FOMC) nervous about inflationary pressures coming from the labour market.

Rounding out the numbers was a drop in the unemployment rate from 3.5% to 3.4%, matching the low recorded in January.

But the challenges are mounting
It’s difficult to draw a firm conclusion after these numbers, but it’s good to point out that labour market data is the most lagging of all data, and you often get somewhat conflicting signals at turning points.

The leading indicators for the U.S. economy are certainly not pretty, and the chart we keep referring to shows the tightening of lending standards by banks, which always leads to a rise in unemployment – when banks pull back their credit lines, struggling businesses become failing businesses, and unemployment rises.