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Employment Situation  
Released On 5/8/2009 8:30:00 AM For Apr, 2009
PriorConsensusConsensus RangeActual
Nonfarm Payrolls - M/M change-663,000 -630,000 -810,000  to -580,000 -539,000 
Unemployment Rate - Level8.5 %8.9 %8.5 % to 9.0 %8.9 %
Average Hourly Earnings - M/M change0.2 %0.2 %0.2 % to 0.3 %0.1 %
Av Workweek - All Employees33.2 hrs33.2 hrs33.2 hrs to 33.3 hrs33.2 hrs

Payroll contraction is slowing but barely and not nearly enough to call a turn higher in the economy. Non-farm payrolls fell a very steep 539,000 in April with net revisions to prior months totaling -66,000, results that fall short of hopes for more meaningful improvement. The unemployment rate jumped 4 tenths to 8.9 percent in a move that will raise talk of an eventual 10 percent rate. Average hourly earnings are very weak, up only 0.1 percent in what will hurt consumer spending power. The average workweek was unchanged at 33.2 hours.

Details of the report show a 149,000 drop in manufacturing, a 126,000 drop in trade & transportation, a 122,000 drop in professional business services, and a 110,000 drop in construction. Contraction of this magnitude will not raise optimism that the worst is over. The only area of strength is in government jobs, up 72,000 and reflecting a 63,000 rise at the federal level.

Given falling inventories in the economy, early indications of slowing contraction in the ISM manufacturing report, and the coming effects of government stimulus this recession may not prove as deep as the early 80s or the post-war period, but that's the bright side. There's still meaningful risk that improvement in job losses in coming months will not be significant. Initial reaction to the report was limited. Markets will have to metabolize details of the report and will perhaps respond through the session to comments by pundits or policy makers.

Consensus Outlook
Nonfarm payroll employment has dropped for 15 consecutive months with March falling 663,000. More than 5 million jobs have been lost since the recession began in January 2008. The civilian unemployment rate jumped to 8.5 percent from 8.1 percent in February and was the highest since the same rate in November 1983. But labor market weakness has softened up wage inflation. Average hourly earnings came in at a monthly 0.2 percent in March with the year-ago wage increase easing to 3.4 percent from 3.6 percent in February. Looking ahead, we are likely to see another sizeable drop in payrolls if the run up in continuing unemployment claims is any indication. Over the past four weeks, continuing claims have jumped 607,000. This also suggests a notable boost in the unemployment rate for April.

The most closely watched of all economic indicators, the employment situation is a set of monthly labor market indicators based on two separate reports: the establishment survey which tracks 650,000 worksites and offers the nonfarm payroll and average hourly earnings headlines and the household survey which interviews 60,000 households and generates the unemployment rate.

Nonfarm payrolls track the number of part-time and full-time employees in both business and government. Average hourly earnings track employee pay while the average workweek, also part of the establishment survey, tracks the number of hours worked. The report's private payroll measure excludes government workers.

The unemployment rate measures the number of unemployed as a percentage of the labor force. In order to be counted as unemployed, one must be actively looking for work. Other commonly known data from the household survey include the labor supply and discouraged workers.  Why Investors Care
During the mature phase of an economic expansion, monthly payrolls gains of 150,000 or so are considered relatively healthy. In the early stages of recovery though, gains are expected to surpass 250,000 per month.
Data Source: Haver Analytics
The civilian unemployment rate is a lagging indicator of economic activity. During a recession, many people leave the labor force entirely, so the jobless rate may not increase as much as expected. This means that the jobless rate may continue to increase in the early stages of recovery because more people are returning to the labor force as they believe they will be able to find work. The civilian unemployment rate tends towards greater stability than payroll employment on a monthly basis. It reveals the degree to which labor resources are utilized in the economy.
Data Source: Haver Analytics

2009 Release Schedule
Released On: 1/92/63/64/35/86/57/28/79/410/211/612/4
Release For: DecJanFebMarAprMayJunJulAugSepOctNov

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