The U.S. economy shed a further 539K jobs in April, bringing the number of jobs lost since the turn in labour market conditions in January last year to 5.6 million. On the positive side, this was the slowest pace of monthly job losses since October last year. The drop in payrolls was better than the market consensus for a more dramatic 600K decline on the month (though whisper number may have been slightly more optimistic than that) and was a sharp improvement compared to the downwardly revised 699K jobs lost the month before. However, given the growing difficulty of displaced workers in finding new jobs, along with the surge of 683K people into the labour force, the unemployment rate surged to 8.9%, from 8.5% the month before.

The details of the report were somewhat less encouraging than the headline number would suggest. The losses were equally split between the services producing (-269K) and goods-producing (-270K) sectors. The key catalyst for the improvement during the month was public sector hiring, as government payrolls added 72K jobs due to 2010 Census hiring. At the industry level, the manufacturing sector (-149K) continues to shed jobs at a fairly dramatic clip, while job losses in construction (-110K), professional services (-122K) and retail trade (-38K) remain brisk.

The strength in the payrolls survey was corroborated by the household survey (conducted separately), and that report claimed that the economy actually added 120K jobs, which is considerably better than the payrolls survey. One caveat to this tidbit is the fact the household survey is generally considered to be inferior to the establishment (payrolls) survey and so we take its implication with a grain of salt, especially since there was a bounce-back factor at work given the 861K of job losses reported the month before. Also noteworthy is the fact that 0.6% M/M drop in aggregate hours worked is much lower than the 1.0% M/M drop recorded the month before.

Taken together, this was a very strong report as it suggests that the pace of deterioration in the U.S. labour market may be easing. Notwithstanding, it is clearly evident that labour market conditions remain very dismal, and the growing difficulty of displaced workers in finding new jobs will continue to place further upward pressure on the unemployment rate, which is now at its highest level in over 25 years. Nevertheless, with the U.S. government likely to add a further 1.5 million workers over the next year for the 2010 Census, there is hope that conditions may improve over the coming months.

Source: TD Bank Financial Group