Reasonable News: Jobs and Service Growth

Yes, the tone of the news is much better than it used to be. The last couple of days have produced reports on employment, claims for unemployment assistance, and for business activity in the non-manufacturing sector. All have been reasonable.

Not treat, but reasonable.

Yesterday’s report from ADP, the payroll servicing company, told us that the economy added 32,000 jobs in April. That’s a sizable jump from March where the gain was revised to 19,000. This portends well for Friday’s government release of the non-farm payroll data which now could show job growth of above 150,000. If that turns out to be the case it would be the best monthly performance in the job market for nearly four years.

The job growth data was supported by today’s report of the new claims for unemployment assistance, which showed another decline. The drop, 7,000, was still not very large but it was the third week in a row after some backsliding earlier in the Spring. the total number of claims, at 444,000, is still much too high for us to relax about the nature of the employment outlook, but at least the trend is now in the right direction.

With ADP reporting job growth for three straight months, and the new claims data trending down, I think it is safe to say that we will start to see the unemployment rate fall. Whether Friday’s report from the government shows a drop I doubt – we are too early in the improvement cycle, but if we can keep up the trend we now seem to be in, it will be inevitable that the unemployment rate falls by the end of the summer.

As for the other decent report: the ISM index of business activity for the non-manufacturing sector remained unchanged at 55.4% in April. While it is disappointing that the recent improvement stalled last month, the index is still at a four year high, and 14 of the 18 industries covered showed an uptick.

So, all in all, another set of decent data.

The recovery is setting in nicely, and all the discussions are now about its strength, and whether we need to raise interest rates yet.

That’s a much nicer conversation to be having.