The Jobs report showed that 115,000 jobs were created in April, with 130,000 private sector jobs offsetting government job losses. This number was a disappointment and below expectations. The only silver lining in the report were upward revisions to the previous month’s readings which added 53,000 more jobs than what was previously reported.
The unemployment rate dropped to 8.1% — the lowest since January 2009. However, thedecline was mainly due to the labor force shrinking by 300,000, rather than by robust job growth. As expected, we are starting to hear more and more about the Labor Force Participation Rate (LFPR). The LFPR dropped to 63.6, the lowest ratio since December 1981. Why is this important? The LFPR gives us a clear read of who is working and who is not. And if someone is not participating, then they are probably receiving some sort of social security or unemployment insurance. The bottom line is that it is tough to pay down debt when there are not enough people participating in the labor force.
Overall the Jobs report was underwhelming and, unfortunately, further accommodative monetary policy or more bond buying (known as Quantitative Easing or QE3) will have a very limited effect on job growth. And the debt drama in Europe continues to escalate, as both Italy and Germany reported higher than expected unemployment rates, while Spain has slipped into its second recession since the financial crisis.
