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.
One thing we can say that we are generally in the neighborhood where economic growth starts afecting presidential elections. In other words, if we’re one year from now, and the economy created 2.5-3 million new jobs (the current trend) and no recession is coming, it’s getting pretty hard to see how the GOP beats Hillary.
I highly recommend the House of Debt blog/website for a coherent discussion of why the recovery has been so weak, and why any policies palatable to the current Congress are not going to do much to change that. The elevator speech version is that recovery relies on consumer spending, and consumer spending prior to 2008 was being fueled by housing debt. The recovery is doing best in states that saw the least drop in housing prices, and worst in states that saw the most price drop, and the difference is enormous.
Again, BLS labor participation rate figures do not separate out / exclude non-working retirees.
Do you have any info as to how much this affects their statistic?
Honestly, no. I’ve seen no hard data with respect to the number of non-working retirees, or how it much it has expanded in the wake of baby-boomer retirement. I just get tired of it being presented as “the drop is entirely attributable to working age people who want to work but who can;t find employment”.
The rate data also includes people on SSDI and people over the age of 16 who aren’t working because they are attending school, so you’d have to factor them out as well.
@Neil Hudelson: I don’t remember where I’ve seen this datum but I think most economists think that half of the recent decline in labor force is boomer-retirement related, and the other half are recession effects.
Here is the chart for labor participation rate for 25-55 yo- prime age population. As you can see, it’s slowly declining..
Correct, but we also have to factor out the members of that set who have opted to go back to school and consequently aren’t working. I’m not saying there has been no effect due to sluggish growth. I just don’t buy the doom and gloom scenarios that usually get attached to these stats.
The participation rate’s been dropping since about 2000, so it appears the inflection point was right around the election of Mr. Bush the Younger. I have no idea why and it doesn’t appear that anyone else does, either. I would guess we’re seeing a cluster of causes – automation, an economy overbalanced toward the financial sector, etc…, but I wonder if there’s a lifestyle cause as well: rich isn’t as “in” as it was in the 80’s and 90’s.
The whole McMansion, Hummer, tasting menu, conspicuous consumption thing gave way to a Priuses, bikes, digital lifestyle. Life is no longer showing off your new Porsche. Now if you want to show some financial swagger you buy your veggies at Whole Foods. Conspicuous consumption has become déclassé. So you can swim in today’s society with less pressure to get more, more, more, since a lot of the “more” that’s valued today is only visible online.
Reduce pressure to buy a better car than your neighbor, you reduce pressure to earn. I don’t think that’s the cause by any means, but I suspect it’s a contributor. I think the pendulum swings on the Showy to Humble axis and is not permanently fixed. Status here in Marin is no longer a Benz S-550, it’s a Tesla. That’s a 30 grand difference. More if you pimp out your Benz (and you do.)
@HarvardLaw92: I’m not a doom and gloom person, but the fact that we have a 5.4% unemployment rate and no wage pressure indicates that both employers and employees know that there are plenty of people who are either on disability or in school, or making do somehow to serve as an effective “army of the unemployed” even though they are not technically in the labor force.
Perhaps, but money is money, and to earn it, one needs money. Real estate prices in Brooklyn indicate that the “creative class” is no less money-oriented than the 1980s yuppies..
I’m seeing wage pressures. Both the NFIB compensation plans indicator and the ECI have been on the rise. If core PCE follows that, which is the question that remains up in the air, I think we’ll see rising wages and inflation in the near future.
My local In-n-Out has bumped starting pay up a buck and they may have to go further. There are Help Wanted signs on every business in Marin County right now. There’s a huge disconnect between what it costs to live here and what Starbucks et al are paying. Something will have to give.
As a side note, I hate graphs like the one your linked to. Not because the information is wrong but it is displayed in such away to make the effect looks more significant than it really is. Any graph that does not have zero on the y-axis is hard to take seriously.
Realizing the difference between the Dow and the actual economy, still it is worthwhile to note the reaction by those whose work is operating the Big Market — DJI is up almost 300 in the face of continuing weakness in China. (I suppose that they agree that Fed tightening will be delayed and that they approve of the British election results.)
What’s wrong with tasting menus? I like being able to try a little of a bunch of different things instead of having to stick to just one choice.
@HarvardLaw92: There is no significant pressure on the general wage level, growth in which has remained nearly flat since 2009. Furthermore inflation and wages are not inextricably linked, one necessarily leading to the other. See Lerner’s Flation for a better understanding.
@HarvardLaw92: There is quite a lot of data that show working age individuals returning to school do so because they cannot find work and seek to upgrade their skills to become “competitive” — which of course fails to reduce unemployment and merely shuffles the queue of who obtains paid work and who does not.
Then why have the NFIC CPI and the ECI been going up?
I enjoy blaming W for everything as much as the next commie pinko liberal, but actually the labor participation rate for working age men has been trending down since the late 60s. That doesn’t show up in the graphs because that’s also the time when women began entering the work force in large numbers, which caused a significant jump in overall working age participation in labor force and hid the decline among men.
Working age women’s participation in the workforce has been roughly level since around 1990, moving in line with the economy – up in good times and down in recessions – so it no longer masks the decline in the participation among working age men.
So it isn’t W and it isn’t Obama and it wasn’t Clinton or Bush or Reagan. Whatever explanation we find for it has to explain a phenomenon that has been going on for 50 years.
Well it would help to link the chart showing what I am stating, wouldn’t it?
@HarvardLaw92: You would need to define what you consider “going up.” Over what period and from from baseline? BLS data do not show an identifiable trend as yet and at least several quarters would be needed to separate a signal from background noise:
@Kari Q: There was a pre-existing, mild downward trend in the parricipation rate but if we look more closely at the time period in question there is a clear inflection point greatly accelerating this process beginning with the Bush Great Recession. If you increase the time serious from 1990 to the present (using the tool at the top of the page) the effect becomes even more pronounced:
Try this as the database is no longer responding at the previous link:
In short the participation rate peaked in 2000, fell until 2004 then remained stable until a sharp drop with the Great Recession.
Well, yes. obviously the participation rate goes down most sharply during a recession and the decline slows or halts, or even reverses temporarily, during stronger economic times. Reading your post, it sounds to me like you are saying the same thing I am about the time period in question, but insisting we are saying something different. Am I misunderstanding you? The economy was strong through the 90s, and labor participation remained roughly steady until the recession in 2000, recovered with the economy, and then declined sharply with the severe recession. I completely agree.
What this fails to take into account is 30-40 year decline in labor force participation among which preceded those events, and which was the key point I was making. Working age men have been slowly leaving the work force since the late 60s. The numbers move up and down with the economy, but the overall trend in participation among working age men has been down for 50 years. Tightening up the time frame and highlighting the reaction to the most recent and most severe recession misses the long term trend.
We are also, by the way, talking about different things. You are referring to the overall participation rate, I am talking strictly about the prime working age population of 25-54, which has shown far less movement.
The wider participation rate is strongly impacted by boomers retiring (not always by choice) and by young people spending more time in school before entering the work force. Focusing on the prime working age population takes those factors out shows the trend among working men that I was talking about.
Just to clarify I wasn’t blaming Mr. Bush. I don’t think any president has much impact on the economy. In fact I don’t think we know half as much about economics as we pretend to.
Fascinating though about male participation rates. Very under-reported and it certainly changes the perspective.
I love tasting menus. Off the top of my head I’ve done tastings at Trotters, Moto (RIP), Tru, Spiaggia, Arun, the Chicago R-C and Four Seasons, some Vegas places, a New York place my editor took me to, The Senderens place in Paris whose name I forget, Ducasse, Michel Rostang, Inn at Little Washington, some place in Napa whose name escapes me but which is sadly not French Laundry, some place in Sausalito, Gordon Ramsay’s London flagship, and the ultimate: Alinea.
Alinea if you can only go to one. Life altering.
I love that stuff. I used to write restaurant reviews for papers in Virginia and Maine. I’m on yet another diet thanks to that stuff. But they’re just not as hip as they used to be.
@Kari Q: The “trend” is differentiated by age. Workers 55 and younger are falling out of the workforce as workers over 55 increasingly remain within it. This holds across both men and women and correlates with government abandonment of full employment policies in the 1970s and adoption of policies intended to maintain a large pool of unemployed workers.
This is true. The labor force participation among older workers declined significantly beginning in the late 60s and reached it’s low point of about 30% around 1990. Since then, it has recovered the lost ground and is now back to where it was 50 years ago – right around 40%. While this is an interesting trend, the relatively low level of labor force participation among older workers means even this large an increase doesn’t have a large impact on the total participation rate, and the aging of the population and moving out of the labor force because of retirement is a much larger factor in the participation rate than the increased participation among older workers.
In other words: sure, more seniors are working than were 20 or 25 years ago, but there are still more of them retiring than continuing to work, so the aging of the boomers continues to be a drag on the participation rate.