The 180,000 gain in payrolls during March and the 4.4% unemployment rate paint a deceptive picture of strength in the labor market, which we expounded in great detail in the April 6, 2007 Daily Global Commentary, ???An Autopsy On The March 2007 Employment Situation Report???. Initial jobless claims rose 19,000 to 342,000 during the week ended April 7, following a revised gain of 13,000 in the prior week. Continuing claims, which lag initial claims by one week, increased 38,000 to 2.527 million and the insured unemployment rate held unchanged at 2.9%. These jobless claims data question the pace of hiring implied by the headlines of the March employment report.

Seasonally unadjusted initial jobless claims rose 3.94% from a year ago, marking the thirteenth weekly reading that is positive. The persistence of this upward trend and the increase jobless claims are more representative of the underlying conditions in the labor market compared with the headlines of the March employment report.

In recent months, indexes tracking employment in the ISM manufacturing and ISM nonmanufacturing surveys have shown a decelerating trend (see chart 3). In March, the employment index of both surveys fell. The employment index of the manufacturing survey declined to 48.7 indicative of a drop in hiring. The available evidence suggests that employment conditions have not improved as significantly as the gain in payrolls reported for March.