Big Payroll Gains but Still High Unemployment
Life + Money

Big Payroll Gains but Still High Unemployment


Employers added 244,000 jobs in April, more than analysts expected and the third straight monthly gain.  But  the unemployment rate edged up to 9 percent from 8.8 percent in March,  the first jump in five months, and there were other signs of caution in the monthly report from the Bureau of Labor Statistics.

Total private-sector payrolls jumped by 268,000, according to the BLS. It was the largest increase since February 2006, suggesting businesses are more optimistic about the economic outlook despite headwinds from rising energy and commodity prices and supply disruptions from the Japan disaster. The private sector has added 1.8 million jobs since a low in February 2010. BLS also upwardly revised employment numbers for the previous two months, to  231,000 job gains in March and 235,000 gains in February,  from 216,000 and 194,000, respectively. 

The gains were widespread, led by retail and services industries. The  retail sector added 57,000  jobs;  professional and business services, 51,000; education and health services, 49,000;  leisure and hospitality, 46,000; health care, 37,000; manufacturing, 29,000, and  mining ,11,000.  Even the battered construction industry saw small job gains for the second straight month, with 5,000 new jobs in April, following a 2,000 gain in March.

Over the past three months, the leisure and hospitality industry has added 151,000 jobs, with nearly two-thirds of the growth in food services and drinking places, suggesting the recent surge in food prices isn’t impeding consumers from eating out, said Paul Ashworth, economist with Capital Economics.

Government employers cut 24,000 jobs last month due to widespread cuts in cash-strapped states and municipalities struggling to close budget gaps. The state and local government sector has shed 289,000 jobs in the past 14 months.

Stocks rose after the report.  The Dow Jones Industrial Average was up 153 points, or 1.2 percent, at mid-day. 

It wasn’t all good news. The BLS uses two measures of employment in its monthly report—a household survey and the payroll survey. Employment gains in the household survey, which is used to calculate the unemployment rate and includes self-employed, farm workers and domestic people not counted in the payroll survey, dipped in April to 190,000 from a 291,000 increase in March.

“The weakness in the household survey might be a sign that the pace of job growth is set to decelerate which would corroborate recent reports on rising first-time unemployment claims,” said Mark Vitner, economist with Wells Fargo. Initial jobless claims for the week ending April 30 surged to 474,000, an eight-month high, according to the Department of Labor.

Despite the strong job gains, the number of unemployed persons remained at 13.7 million, little changed from the previous month, BLS said. The number long-term unemployed (those jobless for 27 weeks and over) declined by 283,000 to 5.8 million.

“While the solid pace of employment growth in recent months is encouraging, faster growth is needed to replace the jobs lost in the downturn,” Austan Goolsbee, chairman of the Council of Economic Advisers, said in a statement.

The labor force participation rate was also little changed in April, holding steady for the fourth straight month at 64.2 percent,  the ratio of the labor force to the total working age population. Normal participation is around 66 to 67 percent and has gradually declined since 2000.

Another measure of employment, the so-called ‘real’ unemployment rate, rose to 15.9 percent up from 15.7 percent. This measures those just marginally attached to the workforce and those working part time but want full time work.

The labor market  “is likely to turn a little choppy over the next few months,” said Kathy Bostjancic, Director for Macroeconomic Analysis, the Conference Board. “Expecting it to stay consistently strong in the face of just meager growth in domestic demand seems like wishful thinking.”

The economy will not regenerate all jobs lost in the recession until mid-2013, said Aaron Smith, economist with Moody’s Analytics. “The unemployment rate will not near its potential rate of around 5.5 percent until 2014. The labor market still faces near-term risks if oil prices do not come down or if the European economy weakens further.”

Related Links:
Unemployment Rises (Wall Street Journal)
Jobs Report Has More Bad News Than Good News (CNBC) 
Job Growth and Unemployment up in April (Politico)