Unemployment Rate Jumps to 6%

April's labor report came in weaker than expected, giving the Fed more reason to keep rates steady

Nonfarm payrolls rose 43,000 in April, near the consensus estimate of 53,000. However, March payrolls was revised to show a drop of 21,000 rather than the gain of 58,000 originally reported. The revision was concentrated in the service sector, especially business services.

The jump in the unemployment rate to 6.0% from 5.7% in April was much more than the 5.8% rate expected by the market. The bulk of the payroll weakness was found in the decline of 79,000 in construction, reflecting a return to normal weather after the warm and dry winter, which had boosted construction employment.

Manufacturing jobs fell another 19,000, in line with expectations, but was offset by a 79,000 services gain. The service increase included a 52,000 rise in personnel-supply services, following the (revised) 69,000 gain last month.

Hourly earnings were up 0.1%, below the consensus estimate of 0.3%. Average weekly hours fell to 34.1 from 34.2, a bad sign for future hiring. Aggregate hours fell 0.3% in April, suggesting a weak production month.

The downward revision of March payrolls and the jump in the unemployment rate suggest the second quarter could be weaker than S&P expects, and are further reasons for the Fed to keep monetary policy on hold.

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