US jobs surge in April

The US Labor Department's employment report for April released yesterday was very good: 274,000 jobs, with upwardly revised gains of 300,000 in February and 146,000 in March. The macroblog provides plenty of perspectives on these numbers as well as those from the previous day's productivity and initial claims reports.

This is one reason that I have not been willing to write off the economic expansion. Not so much the numbers themselves but the upward surprise. Not for the first time, as soon as economists factor in all the negatives in their forecasts, you get a positive surprise somewhere.

However, Kash at Angry Bear highlights the US economy's dependence on the construction industry.

Construction in the Economy
An interesting question in the air this week is this: to what degree is the US economy shifting resources out of other sectors of the economy and into construction projects?... Clearly the house-building industry is highly cyclical. In part it depends on interest rates... But...interest rates do not explain all of the movements of resources into and out of construction...

If so, then perhaps higher interest rates (when they finally do arrive) may cause construction activity to fall not so much because of their direct effect, but more because of how they may contribute to a shift in the psychology of builders...

Also significantly, there was no improvement in manufacturing employment. Which brings to mind what Morgan Stanley's Daniel Lian had written last week:

The rapid growth of Chinese manufacturing was not at the expense of the developing world... The rise of Chinese manufacturing is clearly at the expense of the manufacturing sectors in developed countries.

Speaking of Morgan Stanley and China, Andy Xie has an interesting commentary yesterday on why he thinks China will not revalue the renminbi soon.

The global economic cycle could well turn down next year. China's trade performance would also deteriorate with it, and the pressure on China to revalue would evaporate. I believe it is in China's interest to stall on the currency issue.

However, US workers -- especially in manufacturing -- may have some things to say about that.