Another home run of a jobs report! Is it possible that NFP has hit more back-to-back home runs this year than the Mets and Red Sox have?

Last month’s jobs report seemed incredibly high at 178k. It was revised higher!

This month’s headline number came in at 115k, but importantly private payrolls (not government) came in at 123k. With many economists arguing that around 50K is sufficient to maintain the unemployment rate, this is a stellar report.

Hours worked ticked higher, also a good result. I liked that the JOLTS HIRE rate jumped from 3.1 to 3.5, which is the highest since May 2024. This is a more difficult number to “fudge” (say relative to the number of job openings, etc.). The QUIT rate continues to hover at 2% (has been between 2.1% and 1.9% for over 2 years). I’d like to see that tick higher (shows labor confidence).

The headline number is also in line with ADP, which showed 109k. I like the consistency across a variety of reports.

There is little wage pressure (annual hourly earnings were revised down last month and “missed” this month). While that indicates less “wage pressure inflation” risk, it is concerning, given the litany of CEOs who have discussed how stressed some portion (seemingly a large portion) of the consumer base is. Even “Truflation,” which many point to, for good reason (though it too has some issues, but is a useful additional reference point) has moved back to 2%. Even with these job numbers, I’m very concerned about affordability and the pressure on the economy coming from people at many income levels, living (or barely scraping by) from paycheck to paycheck.

If only we could end the report right here, but…

• The unemployment rate remained unchanged – which seems like a good thing (maybe even a bit disappointing, given the size of the Establishment/Headline number).
  • The Household survey lost 226k jobs (after losing 64k in March). There are always disconnects between the Household survey and the Establishment survey. One is notoriously inaccurate, and the other, the Household survey, is even less accurate. So, we can take this side of the survey with a grain of salt, but it is worth mentioning.
  • Labor force participation dropped to 61.8%. The only reason the unemployment rate remained unchanged is because people dropped out of the labor force. That to me is hardly a good sign. People having difficulty making ends meet, but not showing up in the labor force? You need to go back to 2021 to get such a low participation rate.
• The birth/death model came in at 391k. Apparently, not all of that adjustment feeds directly into the headline number, but it has an impact. Last April and this April we saw “nice” spikes in the birth/death model.
  • Maybe Liberation Day and the War helped motivate people to start their own businesses?
  • Maybe as people filled in their tax forms, they realized they should create an LLC for some GIG economy income?
  • Maybe, the job market isn’t quite so “hot” and people are setting up for the GIG economy? I continue to argue that EIN (Employment Identification Number) applications don’t reflect “new businesses” the way they once did. That they spike when people are struggling and taking on GIG economy jobs, rather than truly starting new businesses.

Bottom Line

While the initial reaction is that the job market hit it out of the park, again, that isn’t the whole story.

There are enough things that could concern the Fed (household report, income, participation rate, and maybe even the birth/death model) that few members are likely to shift their outlook materially.

This report should not help bonds much (the potential for an Iran deal is doing the heavy lifting on that front), but it isn’t scary enough for bond (and rate cut) bulls to back off much.

Have a great weekend!

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