The US employment picture was relatively pessimistic this morning.  And, it wasn’t just because the figure missed the mark.  According to the most recent non-farm payrolls report published by the US Labor Department, payrolls only increased by 115,000.  The figure falls way short of the 160,000 market estimate and remains the lowest gain in the last six months.

So, what made the report so pessimistic?

Other than the lower than expected print, the report shows that construction sector hiring was non-existent in the month as service providers were equally cautious about hiring.  In April service providers were only able to add about 100,000 workers, which is the lowest addition since last summer.  In addition, factories only hired 16,000 new positions while construction employers actually cut jobs by a total of 2,000 for the month.

This breakdown is evidence enough that the US labor market isn’t improving like everyone said it was at the beginning of the year.  In fact, if anything, its stalling and could worsen in the coming quarters as companies remain cautious ahead of the summer months.  This will likely reemphasize the importance of monthly manufacturing surveys and their employment subcomponents in dictating the US employment picture in the months to come.

Unfortunately, with the employment picture so negative, the national unemployment rate once again overstated the positive.  For the month, the unemployment rate actually dipped to 8.1% from 8.2%.  What the rate doesn’t show is the fact that more workers, discouraged by the times, have decided to leave the labor force.  The distortion is actually showing a more optimistic picture than is actually happening – underlining an even bigger complication in the overall condition of the labor market.

With the labor market in dire straits, it increases the likelihood that the market will see some sort of stimulus measure by the Federal Reserve soon.  Whether or not it’s actually be dubbed QE3 will be determined by the market.

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