On the April Jobs Report
This morning’s above-consensus payroll gains came in at the high end of our models’ estimates, spot-on with the model that incorporates small business hiring intentions. This may indicate that the surge of small business optimism since the election is beginning to bear fruit. We were surprised that March’s low payroll number was revised slightly lower, and it points to the same residual seasonality that may have suppressed Q1-2017 GDP last week. With strong April gains in the leisure sector, small gains in retail, and strong but more modest gains in professional services, the labor market reverted back to its long-standing pattern of dominance in job growth by lower-wage sectors. Modest growth in average hourly earnings, on the back of downward revisions for March, gives the hawks at the Fed nothing new to worry about.