What Did April's Job Numbers Really Say About the Economy?

WASHINGTON, DC—It was with great relief that the market received the Labor Department's monthly unemployment statistics for April on Friday. The US economy added 223,000 jobs for the month as the jobless rate fell to 5.4% from 5.5%, the lowest level since March 2008. The figures for March had been worrisome and indeed, even the upward revision of an additional 85,000 was the smallest since 2012.

In April, though, everything seemingly turned around. Consider the stats for construction employment for the month: they posted their strongest monthly increase since January 2014, rising by 45,000, following a drop of 9,000 in March.

But just as March's 125,000 jobs – now revised to 210,000 – were seen in retrospect as a "blip", could not the same story be told about April when May's numbers come out? Unfortunately, yes, for the US economy is clearly starting to stagger, the only question being, for how long.

The most damning report has been the GDP numbers for the first quarter, which were released at the end of last month: the US Bureau of Economic Analysis reported that gross domestic product expanded at a mere 0.2% seasonally-adjusted annualized rate in the first quarter, far below the 1% expected by economists. In addition, regional purchasing manager surveys have been weak and manufacturing in the US, at the moment, cannot be called a picture of health for various reasons, many of which have to do with overseas events and the strong dollar. No matter: it still impacts the US economy.

For now, though, the consensus appears to be that this slowdown will be short-lived and, in fact, is similar to the one that occurred this time last year; both years experienced harsh winter weather that slowed economic activity.

Fannie Mae Chief Economist Doug Duncan called March numbers an aberration after the April numbers were released on Friday. In particular, he said, the snapback in construction employment was very encouraging and "supports our view that a weather-boost impact will show up in the current quarter economic growth."

The economy is facing more than transitory headwinds, he acknowledged -- but not so much that the Federal Reserve Bank won't begin raising the fed funds rate in September as is widely expected.

Or maybe not. The April Federal Open Market Committee (FOMC) statement painted quite a dismal picture of the US economy, according to Sterne Agee Chief Economist Lindsey M. Piegza.

"While some officials remain positive, expecting – hoping – a second quarter rebound will overshadow a slow start to the year, April's modest labor report did little to provide assurance of 'further progress' near-term," she said.

In order to justify a policy change, "expectations of strong underlying fundamentals will need to be proven with prolonged, unwavering strength," Piegza says. "In other words, in order to reinstate confidence that the economy is "back on track", economic activity must sustain an above 3% annualized pace and headline employment must maintain a robust +300k pace month after month after month."

In other words, like always, there is no one clear telling sign for real estate developers, borrowers and lenders to follow as they plan for the rest of the year.