Biggest Non-Farm Payrolls Miss Since 1998

The April labor report was so shocking it seems incorrect. It was nothing like the solid ADP report. Furthermore, markets completely ignored this report after a temporary reaction. Essentially, the numbers were much different than everyone expected, but nothing changed. Don’t overreact to one BLS report which will be revised twice.

Speaking of revisions, the March labor report was revised down sharply from 916,000 jobs added to 770,000. The good news is private payrolls were only revised down 72,000 to 708,000. That means the government added 74,000 less jobs than we initially thought. That’s quite a wild swing.

In April, supposedly 266,000 jobs were added which dramatically missed estimates for 998,000 and the lowest estimate of 755,000. This was the biggest non-farm payrolls miss since 1998. The market decided this report didn’t matter.

Maybe the data is wrong or maybe this is a temporary blip. The S&P 500 rose 74 basis points and the Russell 2000 rose 1.35% on Friday. The 10-year yield initially fell from 1.57% to 1.49%. The algorithms must have reacted to the headline print. However, the 10-year yield ended the day 0.9 basis points higher at 1.577%. The market yawned in the face of a bad report. Was this report too bad to be true?

One type of analysis actually supports this weak number. It’s obvious in hindsight, but no one saw this coming. As you can see from the chart above, overall jobless claims plummeted in the past few weeks. However, if you exclude the artificial impact of Ohio, initial clams barely fell from the March reference week to the April reference week. If this report stands after the next two revisions, we will be able to say for certain that this was an obvious leading indicator for the report that we all missed. 

Where The Jobs Were

218,000 private-sector jobs were added which missed estimates for 893,000 jobs and the lowest estimate which was 780,000 (ADP showed 742,000 jobs added). There would be nothing wrong with this report if it came out 1 year from now when the labor market will be nearly full. However, it’s terrible for an economy in its early phases of fully re-opening. America could potentially go back to normal within the next 2 months (in terms of the pandemic). April was supposed to be one of the best months for job creation this year.

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