Jobs Growth Bounces Back In April, But Weakness Remains
The jobs market bounced back in April, but that's about all we can say.
After a setback in March when jobs growth fell off the good numbers we had been seeing for months, the U.S. economy appears to have bounced back in April with strong jobs growth that suggests that the slowing economy we saw at the start of the year may be behind us:
Total nonfarm payroll employment increased by 223,000 in April, and the unemployment rate was essentially unchanged at 5.4 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, health care, and construction. Mining employment continued to decline.
In April, both the unemployment rate (5.4 percent) and the number of unemployed persons (8.5 million) were essentially unchanged. Over the year, the unemployment rate and the number of unemployed persons were down by 0.8 percentage point and 1.1 million, respectively.
Total nonfarm payroll employment rose by 223,000 in April, after edging up in March (+85,000). In April, employment increased in professional and business services, health care, and construction, while employment in mining continued to decline. (See table B-1.)
Professional and business services added 62,000 jobs in April. Over the prior 3 months, job gains averaged 35,000 per month. In April, services to buildings and dwellings added 16,000 jobs, following little change in March. Employment continued to trend up in April in computer systems design and related services (+9,000), in business support services (+7,000), and in management and technical consulting services (+6,000).
Health care employment increased by 45,000 in April. Job growth was distributed among the three major components–ambulatory health care services (+25,000), hospitals (+12,000), and nursing and residential care facilities (+8,000). Over the past year, health care has added 390,000 jobs.
Employment in construction rose by 45,000 in April, after changing little in March. Over the past 12 months, construction has added 280,000 jobs. In April, job growth was concentrated in specialty trade contractors (+41,000), with employment gains about evenly split between the residential and nonresidential components. Employment declined over the month in nonresidential building construction (-8,000).
In April, employment continued to trend up in transportation and warehousing (+15,000).
Employment in mining fell by 15,000 in April, with most of the job loss in support activities for mining (-10,000) and in oil and gas extraction (-3,000). Since the beginning of the year, employment in mining has declined by 49,000, with losses concentrated in support activities for mining.
Employment in other major industries, including manufacturing, wholesale trade, retail trade, information, financial activities, leisure and hospitality, and government, showed little change over the month.
In addition, jobs growth for February was revised upward from +264,000 to +266,000, and there was a downward revision for March was revised from +126,000 to +85,000. That March revision makes that months number look even worse than it did a month ago, of course, and that may be a reflection of the fact that economic growth in the first quarter was rather weak. Over the last three months, though, the economy has created an average of 191,000 new jobs per month, and the fact that jobs growth seems to have bounced back strongly in April, assuming that it doesn’t get revised downward later, seems to be an indication that the economy started picking up as the weather warmed up in April. Looking at another measure of the health of the economy, there was a moderate uptick in the average hourly work week, and in average hourly earnings, although the growth in that area has been rather unimpressive throughout the course of the economy recovery. Additionally, the long-term unemployment rate is now at 10.6%, the lowest it has been in seven years, the caveat there being that labor force participation continues to be at its lowest levels in thirty years. Just to bring that statistic home, today’s numbers indicate that there some 93,194,000 Americans who are not in the labor force. Clearly, while these numbers are encouraging there is still evidence that the Great Recession has left scars on the economy that have yet to heal.
The New York Times notes that while the numbers are positive, the trend necessarily isn’t:
The American job market rebounded in April, the government said Friday, as employers added 223,000 positions and the unemployment rate decreased to 5.4 percent.
The figures from the Labor Department should alleviate worries that the economy was on the brink of another stall. Other recent reports have revealed a disappointing start to 2015, including new numbers out this week suggesting that the economy might have actually shrunk in the first quarter. The initial jobs report for March showed a disappointing 126,000 gain, which was revised down on Friday to 85,000.
The data suggest that the Federal Reserve will not be in any rush to take its long-awaited first step in raising short-term interest rates, which have been near zero since the onset of the financial crisis in 2008.
Many experts expected that the Fed might move in June, but the consensus has recently shifted to September or beyond as the probable beginning of any gradual tightening effort by the central bank.
Aside from the payrolls gain, “April’s employment report was otherwise something of a mixed bag,” said Paul Ashworth, chief United States economist for Capital Economics, a research firm. “All things considered, any lingering possibility of a June rate hike from the Fed is now off the table, with September probably the most likely liftoff date now.”
Before Friday’s report, some economists were estimating that average hourly earnings might rise 0.2 percent in April, pushing earnings up 2.3 percent from a year ago, a bit better than the typical pace of annual gains since the end of the recession.
In fact, average hourly earnings rose 0.1 percent in April, producing a 2.2 percent annual gain. That modest showing suggests that any meaningful wage gains for most workers will have to wait.
Another important indicator of overall labor market health is the participation rate, which has been stuck near multidecade lows for years, despite healthy hiring in 2015. Last month, it increased 0.1 percentage point to 62.8 percent.
Conservative critics of President Obama’s economic policies cite the depressed participation rate as evidence of how weak the economy remains, despite other seemingly rosy data points like the falling unemployment rate, healthy corporate profits and a buoyant stock market.
Other experts attribute much of the decline to the retirement of baby boomers, the return of some adults to school and other demographic factors.
Whatever the exact cause, lower labor market participation has caused the unemployment rate to fall, albeit for the wrong reasons.
Fed policy makers have suggested both economic and demographic forces are at work, and they too are closely watching the participation rate. Before letting interest raise rise to a level in line with historic norms, they want to see evidence that labor market slack is finally receding, nearly seven years after the collapse of Lehman Brothers turned what had been a mild recession into an economic rout.
And Neil Irwin points that that the numbers are something of a mixed bag rather than the beginning of a trend:
Are you a temperamental pessimist? The 223,000 jobs the nation added in April don’t seem so bad at first glance, but that number is a meaningful step down from the average of 324,000 we were notching during the final three months of last year. Even worse, already tepid job numbers in March were revised down further, to a mere 85,000 jobs added — the first month without a six-figure rate of gain since the middle of 2012. And there is no meaningful progress toward Americans earning higher wages, with a mere 0.1 percent gain in hourly pay and a downward revision to that March number as well.
But if you have a natural proclivity for sunshine, rainbows and always looking on the bright side of life, you have some evidence to cling to as well. The unemployment rate took another step down, to 5.4 percent from 5.5 percent, and primarily for good reasons: because more people had a job and fewer people were out there looking unsuccessfully. The 223,000 number is pretty good in the scheme of things, well above the rate of growth in the working-age population, and suggests that continued, steady progress is underway in restoring the economy to full health.
They’re both right, of course. But rather than looking at the latest readings through a good news/bad news prism, here’s a different word to consider: relief.
Economic growth came to a halt in the first three months of 2015, and revisions to gross domestic product are likely to show it actually contracted. Other economic measures, including of industrial output, retail sales and those March jobs numbers, have been soft. The standard story that economists have been telling is that this is just another messy winter with worse-than-usual weather and perhaps some problems in statistics collection. Nothing to see here; the economy looks just fine.
But there’s a “show me” dimension to that conclusion. Fine, maybe the first quarter was just a bad dream, and, as occurred in 2014, the remainder of the year will show steeper growth and everything will work out fine. But pretty soon, that needs to show up in the data, or we should be skeptical that it is really happening.
So that’s what the April jobs numbers do. If the economy really were flatlining, we would expect job growth to slow more considerably than it has in the last few months. If the economy were truly sputtering, the unemployment rate probably wouldn’t keep falling and wage growth wouldn’t be so steady (if uninspiring).
So what the new jobs numbers offer is relief that the crummy first-quarter data was indeed an aberration, not a new trend.
So, there is some good news but, as usual, it’s nothing to start celebrating about.