The Bureau of Labor Statistics (BLS) reported that there were 253,000 jobs created in April, which was much larger than estimates. However, substantive revisions to the data from February and March subtracted 149,000 jobs in those months combined, which tempered April’s gains. The unemployment rate fell from 3.5% to 3.4%.

What’s the bottom line? There are two reports within the Jobs Report and there is a fundamental difference between them. The Business Survey is where the headline job number comes from, and it's based predominately on modeling and estimations. The Household Survey, where the Unemployment Rate comes from, is derived by calling households to see if they are employed. The Household Survey has its own job creation component, and it showed some underlying weakness with only 139,000 new jobs created last month. Plus, the labor force decreased by 43,000, which is not a positive sign. When we combine these two factors, the unemployment rate did decline – but not because of strong job growth.

In addition, while the headline job growth number appeared strong, there were some cracks in the data. One of the biggest reasons we saw job gains was the birth/death model, where the BLS estimates hiring from new business creation relative to closed businesses. The problem with this modeling is it overestimates during the inflection point of a downturn (like we’re in right now) and underestimates at the inflection of an upturn after a recession. In April, this modeling added 378,000 jobs but it’s hard to believe that many businesses were created last month in the current economic climate where there is less lending from banks.