April Jobs Report Disappointing To Say The Least
Once again, the jobs market appears to be slowing.
As I noted earlier this week, there were already signs that the April jobs report wasn’t going to fall into line with the rather optimistic numbers we’d seen from November through February. Many had hoped that the disappointing numbers we’d seen in March were an anomaly and that we’d return to something more along the lines of what we saw in February. Going into this morning’s report, analysts expected that we’d see something in the range of 166,000 jobs added, not great but at least it would have been something. As it turns out, though, the pessimists were correct:
The United States had another month of disappointing job growth in April, the Labor Department said Friday.
The nation’s employers added 115,000 positions on net, after adding 154,000 in March. April’s job growth was less than what economists had been predicting. The unemployment rate ticked down to 8.1 percent in April, from 8.2 percent, but that was because workers dropped out of the labor force.
The share of working-age Americans who are in the labor force, either by working or actively looking for a job, is now at its lowest level since 1981 — when far fewer women were doing paid work.
“It’s a pretty sluggish report over all,” said Andrew Tilton, a senior economist at Goldman Sachs, noting that economists had expected more younger workers to join the labor force as the economy improved. “There were a lot of younger people who had gone back to school to get more education and training, and we thought we’d see more of them joining the work force now. May, June and July — the months when people are typically coming out of schooling — will be the big test.”
The report contained other discouraging news; the average workweek, for example, remained unchanged at 34.5 hours.
Government job losses totaling 15,000 continued to weigh on the economy, tugging down job growth as state and local governments grapple with strained budgets. Private companies added 130,000 jobs, with professional and business services, retail trade, and health care doing the most hiring.
Such job growth is not nearly fast enough to recover the losses from the Great Recession and its aftermath. Today the United States economy is producing even more goods and services than it did when the recession officially began in December 2007, but with about five million fewer workers.
Given the many productivity gains across the economy – that is, the fact that employers have learned how to make more with fewer workers – there is also debate about what exactly “healthy” employment would look like in the current economy, and whether it still makes sense to use the pre-financial-crisis economy as a benchmark for what the employment landscape should look like.
There were revisions to the numbers from February and March that make those months look slightly better than they did when the numbers for those months first came out, but as CNBC notes the underlying facts make it clear that we still haven’t gotten over the weaknesses that have made this one of the weakest recoveries the economy has seen:
[O]verall the report painted a picture of a jobs market that had gotten a boost from unseasonably warm winter weather but now has cooled.
The service sector again accounted for most of the job creation, growing 101,000 while manufacturing added just 16,000, according to the Bureau of Labor Statistics. Governments cut a net 15,000 jobs for the month. The average work week was unchanged at 34.5 hours.
Though the headline number indicated job creation, the total employment level for the month actually fell 169,000. The disparity likely emanates from a drop in the labor force participation rate — or the level of Americans actively looking for jobs or otherwise employed — from 63.8 percent to 63.6 percent, its lowest level since December 1981.
The amount of discouraged workers swelled from 865,000 to 968,000, an increase of 12 percent.
“In the weakest recovery since the Great Depression, more than four-fifths of the reduction in unemployment has been accomplished by a dropping adult labor force participation rate — essentially persuading adults they don’t need a job, or the job they could find is not worth having,” said University of Maryland economist Peter Morici.
Outside of job creation itself, which is woefully below what we’ve seen in other recoveries (in April of 1984, for example, more than 400,000 new jobs were created) The labor force participation numbers are perhaps the most important ones to pay attention to here. The media, and the Obama campaign, will point to the fact that the Unemployment rate has fallen to 8.1%, but what they aren’t telling you is that if the labor force participation rate in April was the same it had been in March, the rate would have risen to 8.4% and if the participation rate had been the same as it was in January 2009, the unemployment rate this month would be 11%. It’s fairly easy to make that unemployment rate go down when people give up looking for work altogether, but if you look beneath the topline numbers you see that thinks aren’t nearly as rosy as they seem to be.
To get an idea of what we’re dealing with, consider these two charts from Zerohedge.
The first shows us that Labor Force Participation is at its lowest point since 1981:
The most significant thing to remember about this is that the potential labor pool in 2012 is far larger, and far more diverse, than it was 31 years ago. Not only is the working age population larger but it was been increased over the years by the fact that the number of women working is larger today than it was back then. And yet the number of people participating in the labor force is at the same level it was when Ronald Reagan was just beginning his time in office. Some analysts have ascribed the drop in labor force participation to Baby Boomer retirement and while that may account for some of it, it most assuredly doesn’t account for all of it. Moreover, if someone in their late 50s who’s unemployed decides to give up on looking for work and call themselves “retired,” that doesn’t really count as a success for the economy.
The other chart shows us that the number of people not in the labor force has been on a steadily ascending curve since the recession started:
Again, retirement will account for some of this, but not all of it. For the most part it’s yet another sign that the job market is so weak that some people have simply given up looking for a job altogether.
Numbers like this make it hard to argue that the mere fact that the unemployment rate is dropping means that the economy is significantly improving. The average American is, I think, smart enough to recognize the difference between rosy headlines on the news and the reality that they see around them. While there are some signs that the economy is growing at least modestly, what we’re learning once again this year is that this growth is barely strong enough to create enough jobs to keep up with population growth, never mind generate the kind of numbers to give anyone hope that we’re going to see anything approaching normal, or at least what we used to think was normal, for the foreseeable future. What the political impact of that might be is anyone’s guess, but it’s generally not the kind of thing that incumbents should be comfortable with.