April’s NFP jobs report was bad. Very bad. One aspect that was mooted around the time of the release was that there were seasonal adjustment issues. However, it has been hard to get the detail on this.

Some issues to consider

ING point out that manufacturing employment fell by 18K, trade and transport by 81K, retail fell by 15K, and temporary help by 111K. The strange aspect of these falls is that these sectors have been performing well. So, why the job losses?

A range of factors impacting labour supply

ING point out that the National Federation of Independent Business (a small business sector comprising of 50% of all the jobs in the US) say that business owners are struggling to fill jobs. 59% of small businesses are reported to trying to hire in April. Of these firms, a huge 92% of these jobs reported few or no qualified applicants. Look at the chart below showing the difficulty there is in filling open positions.

So what we can know is this. There is a demand for workers. So, this should mean that US jobs will pick up. This dip is temporary.

Reasons that labour supply is weak

Lack of child care issues and home-schooling which means some parents had to stay at home. Extended unemployment benefits mean the urgency to return to work has been reduced. These benefits are set to continue until September.

The takeaway

The demand for jobs is there. The supply will return when the unemployment benefits run out. It is hard to argue with ING’s base case that there will be a December announcement of a QE taper. The recovery time is simply extended, but not cancelled. In the near term watch the key levels marked below on the DXY for clues as to the dollar’s next direction.