April jobs report: another good month, with little impact from “liberation day” tariffs - yet

 

 - by New Deal democrat



My question over the past year had been whether “decleration” into a “soft landing”would turn into “deterioration” towards a recession. That has now been overtaken by events in the form of T—-p‘s tariffs and trade wars. So my focus now is looking for hard data, rather than reports of sentiment, indicating whether or not the effects of those stupefying actions have begun to hit.

I had thought last month’s employment report would be the last good one. It was not, because April was another good employment month.

Below is my in depth synopsis.

HEADLINES:

• 177,000 jobs added. Private sector jobs increased 167,000. Government jobs increased by 10,000, despite federal government layoffs. The three month average was an increase of +155,000, on par with the lowest average last summer.
• The pattern of downward revisions to previous months continued this month. February was revised downward by another -115,000, and March was revised downward  by -43,000, for a net decrease of -58,000.
• The alternate, and more volatile measure in the household report, increased by 436,000 jobs. On a YoY basis, this series increased 2,449,000 jobs, or an average of 204,000 monthly.
• The U3 unemployment rate was unchanged at its repeated 12 month high of 4.2%. Since the three month average is 4.167% vs. a low of 3.9% for the three month average in the past 12 months, or an increase of 0.267%, this means the “Sahm rule” has been UN-triggered once again. 
• The U6 underemployment rate declined -0.1%, to 7.8%, down -0.2% from its 3+year high in February.
• Further out on the spectrum, those who are not in the labor force but want a job now also declined sharply by -241,000 to 5.634 million, about average in the past four years.

Leading employment indicators of a slowdown or recession

These are leading sectors for the economy overall, and help us gauge how much the post-pandemic employment boom is shading towards a downturn. This month they were mixed:

• the average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, declined -0.2 hours to 40.9 hours, and is down -0.7 hours from its 2021 peak of 41.6 hours.

• Manufacturing jobs decreased by -1,000. This series had been  in sharp decline, but it has leveled off in the past six months.
• Within that sector, motor vehicle manufacturing jobs fell -4700.
• Truck driving continued its rebound for the second month, up 1,400.
• Construction jobs increased another 11,000.
• Residential construction jobs, which are even more leading, declined -700 from their post-pandemic high one month ago. Whether this is a decisive peak remains to be seen.
• Goods producing jobs as a whole increased 11,000, and are at their highest level in 17 years! This is especially important, because these typically decline before any recession occurs. But on a YoY% basis, these jobs are only up less than 0.3%, which is very anemic although not quite recessionary.

• Temporary jobs, which have declined by over -550,000 since late 2022, rose this month, by 3,600. The bottom for this metric remains October 2024.
• the number of people unemployed for 5 weeks or fewer declined -177,000 to 2,185,000, vs. its 12 month high of 2,465,000 last August, and its October low of 2,109.000.

Wages of non-managerial workers

• Average Hourly Earnings for Production and Nonsupervisory Personnel increased $.10, or +0.3%, to $31.06, for a YoY gain of +4.1%, up 0.2% for the month and an average YoY gain for the past 12 months. Importantly, this continues to be well above the 2.4% YoY inflation rate as of last month.

Aggregate hours and wages: 

• The index of aggregate hours worked for non-managerial workers rose a small 0.1% to a new record high. This measure is also up slightly over 1.5% YoY, its highest such gain in three years.

• The index of aggregate payrolls for non-managerial workers also rose 0.4%, and is up 5.7% YoY, its biggest YoY gain since December 2022. This is also well above the inflation rate, meaning a continuation in the ability of households to increase consumption.

Other significant data:

• Professional and business employment increased 17,000. These tend to be well-paying jobs. This series peaked in May 2023, but bottomed in October 2024, and is up 0.3% since then. It remains lower YoY by -0.1%, which in the past 80+ years - until now - has almost *always* meant recession. This is vs.  last spring when it was down -0.9% YoY.
• The employment population ratio increased 0.1% to 60.0%, vs. 61.1% in February 2020.
• The Labor Force Participation Rate increased 0.1% to 62.6%, vs. 63.4% in February 2020.

SUMMARY

Although there were some negatives, this - like last month - was generally a good, positive report. Aside from the headline numbers, goods producing jobs in the aggregate held up quite well, as did several components including construction jobs. Several sectors that had been languishing — trucking, temporary jobs, and professional and business jobs — continued their rebound. Aggregate hours and payrolls also rose, and the latter in particular remains well ahead of inflation. The unemployment rate, employment population ratio, and the labor force participation rate also all improved.

The only relatively weak spots were the slight downturns in manufacturing and manufacturing hours, as well as residential construction jobs. 

So this was once again good, positive report, with no signs of deterioration month over month. One special items to especially note this month is that the data for the report is gathered in the earlier part of the month, so the impact from tariff “liberation day” was only just beginning.

March construction spending: yet more incipient tariff effects

 

 - by New Deal democrat

I’ll keep today’s report on construction spending brief. The important part of this metric is residential construction spending, another proxy for housing.

On a nominal basis, in March residential construction spending (red) declined -0.4%, while total construction spending (blue) declined -0.5%:

These are hardly terrible declines.

BUT, the price of construction materials rose a sharp 1.8% in March (probably mainly tariffs on Canadian lumber), so both real total and residential construction spending declined more than 2%:

While these declines by themselves are not recessionary, as demonstrated by 2021’s steep decline, they are both very likely the proverbial tip of the spear of future tariff effects.

So, this morning I have discussed three data points: jobless claims, the ISM manufacturing report, and construction spending. And all of them looked like they might be beginning what will prove to be recessionary declines.

April ISM manufacturing report continues showing contraction

  - by New Deal democrat

[Note: I’ll report separately on construction spending, also released this morning]

Although manufacturing is of diminishing importance to the economy, (it was in deep contraction both in 2015-16 and again in 2022 without any recession), the ISM manufacturing index remains an important indicator with a 75+ year history of accurately describing that sector and forecasting it over the short term. 

Any number below 50 indicates contraction. The ISM indicates that the number must be 42.5 or less to signal recession. I use an economically weighted three month average of the manufacturing and non-manufacturing indexes, with a 25% and 75% weighting, respectively, for forecasting purposes.

During the winter months, as most businesses likely figured that the new Administration would be laying more tariffs, there was a rush to get their new orders in asap. That has emphatically ended. 

In this morning’s report for April, the headline number declined -0.3 to 48.7, the second month of contraction, while new orders rose +2.0 to 47.2, indicating slower contraction.

Here is a look at both the total index (blue) and new orders subindex (gray) for the past ten years:

Note that both have been lower in 2022-23 and also the headline was lower in 2016, both times without signaling recession, because services remained in firm expansion. Including this month, here are the last six months of both the headline (left column) and new orders (right) numbers:

NOV  48.4. 50.4

DEC 49.2. 52.1

JAN 50.9  55.1

FEB  50.3  48.6

MAR 49.0. 45.2

API 48.7. 47.2

The current three month average for the total index is 49.3, and for the new orders subindex 47.0. 

For the economy as a whole, the weighted index of manufacturing (25%) and non-manufacturing (75%) indexes is more important. The average of the last two months for the headline and new orders numbers in the non-manufacturing report is 52.2 and 51.3, respectively. To signal economic contraction, this month’s numbers in the non-manufacturing report must be 50.2 and 50.9, respectively. While the headline number may not decline that much, there is a very good chance that the new orders number will decline enough for a red flag.

In summary, as of now the combined indexes suggest an economy that is growing by the barest of margins. We will find out if that changes when the non-manufacturing report for April is released on Monday.

Jobless claims: “and so, it begins”?

 

 - by New Deal democrat

I suspect we will look back on this morning’s report on jobless claims as the first concrete sign of impending recession.

Initial claims rose 18,000 to 241,000, the highest since February 22. The four week moving average rose 5,500 to 226,000. With the usual one week lag, continuing claims rose 83,000 to 1.916 million:

As usual, the YoY% change is more important for forecasting. So measured, initial claims were up 15.3%, the four week average up 7.5%, and continuing claims up 8.2%:

One bad week is not enough to change a forecast. As minimum, I would need the four week average to rise over 10%. 

Finally, let’s take our final look at what might be in store for the unemployment rate:

The monthly average of initial claims is in the middle of its 12 month range. Continuing + initial claims are at the top end of theirs. While that does not suggest an increase in the unemployment rate to a new high, it does suggest that it will not go lower than the 4.1%-4.2% range in the next several months.

Ordinarily I would pay little attention to a one week jump, which normally is just an outlier. It will take at least one more bad week to drive any of these numbers into even yellow flag territory. Still, with all that we know about the tariffs and trade situation, my suspicion is that this data qualifies as “and so, it begins.” 

Real personal income and spending tell us the consumer economy was expanding nicely in March

 - by New Deal democrat

Aside from the long leading indicators I discussed in that post, GDP is a look in the rear view mirror, because it includes January and February. Personal income and spending for March, although it is part of that GDP report, is therefore more current.

Like the housing data we got earlier this week, income and spending told us that the economy was in reasonably good shape through March. The deflator declined by less than -0.1%, rounding to unchanged. Thus both nominal and real readings for income, at +0.5%, and spending, at +0.7%, were the same.

Here is real personal income and spending normed to 100 since the onset of the pandemic, showing the former up 12.3%, and the latter up 15.8%:

An important issue has been whether personal consumption would actually decline in Q1, which was answered in the GDP report. For March, it was an important increase.

Typically it is real spending on goods which declines before recessions, while real spending on services can increase throughout all but the most severe of them. In March both increased to new post-pandemic highs:

Another important but mixed reading was the personal saving rate, which declined -0.2% to 3.9%. This generally indicates consumer confidence, but the downtrend in the past several years makes this rate among the lowest ever. Although not shown, the average between 200 and 2019 was 5%:

Finally, there are several important coincident indicators used by the NBER in recession dating in this report.

First is real personal income less government transfer payments. This increased 0.7% in March:

Second is real manufacturing and trade sales, which are calculated with a one month delay. In February they increased 0.9%, but remain -0.1% below their December 2024 high:

In sum, real personal income and spending in March tells us that despite the negative GDP print, mainly caused by front-running tariffs via a surge in imports, the consumer portion of the US economy remained in expansion.

Despite negative headline, Both long leading indicators in the Q1 GDP report as well as consumer spending, were positive

 

 - by New Deal democrat

The big headline takeaway in today’s advance report on Q1 GDP, besides the -0.3% number, was that imports deducted about -5.0% on an annualized basis, overcoming a fairly strong 3.0% contribution in real terms from consumer spending. Here’s the breakout graph from the BEA:

The graph tells the story; both real consumption and investment together increased almost 5% in real terms annualized, but were overbalanced by an even bigger surge in imports (counted as a negative). In other words, it is compelling evidence for massive front-running of tariffs by both producers and consumers. That contributed to the on-trend increase in real final sales to domestic purchasers, the typical core of the economy:

But as usual, my focus is on the leading indicators contained in the report. And this quarter, they were both sharply negative.

The first of the two is residential fixed investment, particularly as a percentage of GDP. This is a proxy for housing.

In nominal terms, residential fixed investment rose 1.3%. Because the GDP deflator increased 0.9% quarterly, it rose 0.4% in real terms. Whether measuring in nominal or real terms, it rose as a share of GDP:

Nevertheless both remain below their recent peaks in Q1 2024. Still, the general trend of the past several years has been a slow increase. Since on average this number peaks 7 quarters before the onset of a recession, in normal times it would be consistent both with a recession starting in the second half of this year, but also if there were to be a further increase above Q1 2024 levels, a continued expansion throughout.

The second long leading indicator is corporate profits, which won’t be reported for another month. Fortunately there is a very good proxy in the form of proprietors’ income, which tends to peak simultaneously with or one quarter later than corporate profits.

In Q1, nominally proprietors’ income rose 1.2%. Since the deflator increased 0.9% on a quarterly basis, translated into real terms it increased by a rounded 0.3%:

In ordinary times, the bottom line would be that,  in Q1 both long leading economic indicators contained in the GDP report indicated continued expansion through the rest of this year. Unfortunately, because of the tariff situation, these are not ordinary times, and indeed much of this report, both in positive and negative terms, was confounded by likely massive front-running of same.

JOLTS report shows that the “soft landing” was intact - through March

 - by New Deal democrat

The JOLTS survey, which decomposes the employment market into openings, hires, quits, and layoffs, was reported this morning for March. The question over the past year has been whether they best describe a “soft landing,” or “hard” one ending in recession, and that concern has been greatly exacerbated by the actions of the new Administration.

Additionally, several components are slight leading indicators for jobless claims, unemployment and wage growth.

In March the news remained mainly good, as the only measure which did not improve was the “soft” metric of openings.

To begin with, here are openings, hires, and quits all normed to 100 as of just before the pandemic:

Openings, which are “soft” data and have generally uptrended going all the way back to the turn of the Millennium, remain above their pre-pandemic levels, but this is not terribly significant. Both hires and quits fell below their pre-pandemic levels at the beginning of 2024. But the past 12 months of data show stabilization - a good sign of a “soft landing” in process:

Openings did show some deterioration this month, but are well within the zone of noise over the past 12 months. Meanwhile hires have been very stable since last July, and Quits rose to close to a 12 month high this month, although they too are within their range of noise.

Last month one item of concern was layoffs and discharges, which increased to their highest level in almost two years excluding last September. This month that completely reversed, as quits fell to nearly a 12 month low:

This is of a piece with the downtick in new jobless claims in April. (red, right scale), which typically follow with a short lag.

Finally, here is the update on the quits rate (left scale) vs. the YoY% change in average hourly wages for nonsupervisory workers (red, right scale) which it tends to lead:

Although the quits rate improved in March from 2.0% to 2.1%, it did downshift during 2024. Since average hourly wages tend to follow, but have not yet reflected that downshift, despite this month’s increase in Quits, the likelihood is that wage growth will decelerate further on a YoY basis over the next few months.

The message of this morning’s JOLTS report is that the “soft landing” was intact through March, with the likely attenuation in future wage gains its only (slightly) negative component. Unfortunately since then we have endured Tariff April.

Repeat home sales confirm deceleration of prices for existing homes

 

 - by New Deal democrat

Last week I noted that the deceleration in YoY prices in the existing home sales report was indicative of the ongoing rebalancing of the housing market, and I would be looking for confirmation in the repeat home sales reports this week.

This morning, we got it.

On a seasonally adjusted basis, in the three month average through February, according to the Case-Shiller national index (light blue in the graphs below), prices rose 0.3%, and the somewhat more leading FHFA purchase only index (dark blue) rose 0.1%. This is welcome news, because in late 2024 the trend was one of re-acceleration. In particular, this is the second month in a row of tame increases in the FHFA index. [Note: FRED hasn’t updated the FHFA data yet]:

Both indexes also decelerated on a YoY basis, as the Case Shiller index fell by -0.2% to a 3.9% gain, and the FHFA index by -0.9% also to a 3.9% YoY increase:

Because house prices lead the measure of shelter inflation in the CPI, specifically Owners Equivalent Rent by 12-18 months, despite the good news this month the recent acceleration in sales prices is likely to lead to an even slower deceleration in the official CPI measure of shelter. On the other hand, this month’s report adds to the evidence that OER will trend gradually towards roughly a 3.5% - or even 3.0% - YoY increase in the months ahead.

This is particularly the case as the most leading rental index, the Fed’s experimental all new rental index, was updated several weeks ago for Q1, and indicated a median YoY *decrease* in new apartment rents of -2.2% YoY, with all rents including existing rentals increasing at a rate of +3.3% YoY in Q1:

As a result, here is the updated calculation of the house prices vs. the YoY% change in Owners Equivalent rent:

Note that the last time the Case-Shiller and FHFA Indexes were in this range YoY (2019), Owners Equivalent rent gradually declined in the 12-24 months thereafter to the +2% YoY level. So this morning’s reports were good news for the rebalancing of the existing vs. new homes markets.

Regional Fed manufacturing indexes average in April is recessionary; services on the cusp [UPDATE: Dallas Fed services survey tanks]

 

 - by New Deal democrat

This month the economic surveys by the five regional Feds which conduct them - New York, Philly, Richmond, Kansas City, and Dallas - have assumed additional importance as among the likely first warnings of impacts from T—-p’s trade wars. 

This morning the last manufacturing survey for the month, from Dallas, was released, and declined sharply. Below is the April update of the new orders component of all five:

• Empire State up +6.1 to -8.8
• Philly down -42.3 to -34.2
• Richmond down -9 to -13
• Kansas City up +1 to -11
• *Dallas down -19.9 to -20.0
• Month-over-month rolling average: down -18 from +1 to -17

Some other observers have also been keeping track of these surveys. Here’s a graph of the above new orders indexes including all of them except for this morning’s update from Dallas:

The average now is as bad as it was at its worst at the end of 2022. 

I’ve also been keeping track of the same regional Feds’ non-manufacturing service sector surveys. Dallas will not report until tomorrow. Here are the other four:

• Empire State down -0.5 to -19.8
• Philly up +1.3 to +6.9
• Richmond down -16 to -30
• Kansas City up +3 to +3
• [UPDATE] Dallas down -8.1 to -19.4
• 
  

The average for service so far this month is -7 [UPDATE -12]. Here is a similar graph of those surveys:

Again, the average is about where it was at its worst in 2022 [UPDATE: Now worse]. But then global supply chain pressures were easing post-COVID; now they are almost certainly rapidly worsening. 

In general the regional average for the Fed surveys is more volatile than the corresponding ISM index, but usually correctly forecasts its month-over-month direction. Last month I closed my report on the average of the two ISM surveys with the comment that

“For March alone, the economically weighted headline average was 50.4, but the new orders weighted average fell into contraction at 49.1. The three month economically weighted average for the manufacturing and non-manufacturing indexes combined is 51.8 for the headline, and 50.9 for new orders.

“Because it is only one month in the new orders component that has fallen below 50, we aren’t quite in the yellow caution zone yet. But if next month’s readings duplicate this month’s, the new orders component will give at very merit the yellow caution flag.”

The regional Fed reports suggest that yellow caution flag is very likely to be hoisted when the April reports come out. And in case you haven’t seen this elsewhere, here is what is coming with trans-Pacific contained shipping to the West Coast:

We could be in a recession in a month.

Coronavirus dashboard: five years on

 

 - by New Deal democrat



Covd-19 has now been with us for over five years. The first reliable statistics started to be kept at the end of March 2020. On Friday the CDC issued the final update for deaths ending the week of March 29, 2025, which means we now have five full years of documentation. So this is a good time to take a look back, and to update where we stand.

To cut to the chase, it appears the original Omicron variant was a watershed. All variants that have come and gone since then have been descended from that one.Between widespread, probably near universal infections from that line over the past three years, and vaccinations targeted at that variant line, it very much looks like the virus is now facing a wall of resistance.

Here is the CDC’s wastewater particle graph. This graph started at the time Omicron was rampant, so it only covers the last 3+ years:

You can see that Covid particles in wastewater have never gotten close to their Omicron levels, and there has been a general decline over the past year.

Even more significant is what has happened to deaths. Here is the full five year long weekly chart of deaths:

Basically, there was an awful first two years, followed by a sharp and continuing decline thereafter.

Here is the same chart, but just for the last three years (note difference in scale):

Even confined to just this time period, the pattern of ever decreasing fatalities is clear.

Not only have deaths declined, but they have declined by far more than can be explained simply by the prevalence of the virus in circulation. Below I show particles per milliliter for each significant peak beginning with Omicron (1st column), deaths in thousands (second column), and number of fatalities per virus particle (3rd column):

12/21 24.6. 21.3. 866

6/22. 10.5. 3.4. 324

12/22. 11.3. 3.9. 345

12/23. 14.0. 2.6. 186

6/24. 9.0. 1.4. 156

12/24. 5.5. 1.0. 182

On a per particle basis, lethality declined by more than half in 2022, and then by about another half from the end of 2023 on. This is due to a combination of better treatments for the disease, more and repeated vaccinations, and nearly universal exposure with resulting varying levels of resistance.

To drive the point home, here is the number of deaths for each 52 week period beginning April 1 of each of the past five years:

4/1/20-3/31/21 504,000

4/1/21-3/31/22 433,000

4/1/22-3/31/23 128,000

4/1/23-3/31/24 64,500

4/1/24-3/31/25 36,400. 

One year ago I closed this update with the following:

“Finally, how does this compare with the flu? Well, the typical flue season gives rise to about 35,000 deaths +/-10,000. So even at 64,000 COVID is presently the equivalent of a very bad flu season. If the trends of the past several years continue, then in 1 or 2 years we will be down in the vicinity of 35,000 deaths per year.”

And here we are, one year later, extremely close to that 35,000 benchmark. Covid has become like a second flu. If this trend continues for another year, we could be down to about 20,000 deaths. 

Infectious disease modeler JP Weiland recently wrote that for another significant outbreak, a new line of variants not descended from the original Omicron would probably have to develop. Let’s keep our fingers crossed that it does not happen.

Weekly Indicators for April 21- 25 at Seeking Alpha

 

 - by New Deal democrat

My “Weekly Indicators” post is up at Seeking Alpha.

Another important indicator - corporate profits - tipped into negative territory this week, as Q1 profits look to be substantially below those of Q4 of last year. On the other hand, real money supply from the Fed has tipped back into positive territory.

As per most of my posts in the past few weeks, the real crux of the matter at present is whether producer and consumer durable goods spending, and consumer spending in general, turn negative. So far they have not.

As usual, clicking over and reading will bring you up to the virtual moment as to the state of the economy, and reward me with a penny or two for my efforts.

March existing home sales continued the slow process of rebalancing in the housing market

 - by New Deal democrat

Existing home sales are not that important for forecasting purposes, since they have much less economic impact than new home sales, because the main effect is simply a change in ownership. But there has been an ongoing shortage of housing for over a decade, which was only exacerbated by the pandemic. So I mainly look at this data for evidence of a rebalancing of the market.

And in March there was further evidence of that rebalancing.

Like new home sales, existing home sales have been rangebound for the past 2 years, in reaction to mortgage rates remaining in the 6%-7% range. In February they were near the top of that range at 4.26 million annualized. In March they retreated towards the bottom of that range, at 4.07 million, so the rangebound trend continued:

But as indicated above, the main issue has been a chronic lack of inventory. As shown in the graph below, this trend has been going on for at least 10 years, well predating the pandemic. Unlike sales, this series is not seasonally adjusted, so it must be looked at YoY. In March inventory continued its slow climb from its 2022 Covid lows, at 1.330 million units, a 19.8% increase, and the highest March reading since 2020:

Nevertheless inventory remains well below its pre-2014 levels (not shown), which typically were in the 1.7 million to 1.9 million range, which means that the shortage still exists.

This shortage is still creating upward pricing pressure, but that pressure is abating somewhat. Like prices, this data is not seasonally adjusted and so must be looked at YoY. Here is what the last 10 years look like:

In the immediate aftermath of the pandemic in 2021-22, prices increased as much as 15% or more YoY. After the Fed started its sharp hiking regimen, prices briefly turned negative YoY in early 2023, with a YoY low of -3.0% in May of that year. Thereafter comparisons accelerated almost relentlessly to a YoY peak of 5.8% in May of 2024, before decelerating to 2.9% in September.

Here are the comparisons since:

October 4.0%

November 4.7%

December 6.0%

January 4.8%

February 3.6%

In March this deceleration continued, with a YoY% gain of 2.7%, the lowest such gain since September 2023.

This is good news, but as indicated above pricing pressures will remain until the shortage of inventory is resolved.

The bottom line is that existing home sales continued the slow rebalancing of the housing market. Next week we will see if the repeat sales indexes buttress this evidence.

More front-running in March, for durable goods orders; but more manufacturing contraction in April

 

 - by New Deal democrat



This morning we got more hard data on manufacturing, one from March, one for this month.

In March new durable goods orders (blue in the graph below) soared higher by 9.2% to an all-time high. This was all about front-running tariffs, because excepting motor vehicles they were unchanged (not shown). Meanwhile core capital goods orders (red, right scale) increased only 0.1%, -0.2% below their January peak:

Since this pulled orders forward from future months, there must inevitably be a giveback in the months ahead. But this does tell us that Q1 was not negative for manufacturing at least.

Meanwhile the Kansas City Fed reported on manufacturing in its district for this month declined slightly further into contractionary territory again, at -4:

Note that this is still above its average reading for the past several years.

The new orders subindex rose +1 to a still very contractionary -11.

The average for the four regional Feds reporting manufacturing so far is -13. For new orders the average is -17. Needless to say, this is consistent with a recession in the manufacturing sector.

The Kansas City Fed will update its general business conditions survey, that includes services, tomorrow.