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Vectra Bank Expert Jeff Thredgold

Jobs...Better Still

Written by Jeff Thredgold, President, Thredgold Economic Associates

May 10, 2011

American employment continued to rebound in April, with the strongest private-sector rise in more than five years.  While overall job gains are still tepid versus average gains in prior U.S. economic recoveries, the stronger data of recent months is most welcome.

The U.S. economy added an estimated 244,000 net new jobs in April, more than the 185,000 consensus view of forecasting economists.  Casting a pall over the stronger-than-expected employment rise was the jump in the nation’s unemployment rate from 8.8% in March to 9.0% in April.  More on that will follow.

The Private Sector
The 244,000 net rise was a combination of an estimated 268,000 net new jobs in the private sector and the loss of another 24,000 net jobs in the government sector.  The solid private sector rise of 268,000 jobs was the largest monthly increase since early 2006.

US Employment ChangeThe private sector has added 760,000 net new jobs during the past three months, with 2.1 million net new jobs since February 2010.  Unfortunately, this number still pales against the painful loss of roughly 8.7 million jobs during 2008 and 2009 collectively.

New job additions have been widespread during the past six months, with an estimated 73% of industries adding new workers.  Such is the most broad-based employment gain in 13 years (cnn.money.com).
Of continuing concern was additional weakness in the government employment sector, particularly in state and local governments.  Overall government employment fell by 24,000 jobs during April, with 15,000 jobs lost in local governments.  One of three jobs lost at the local level was in the education sector.

Severe budget pressures have led employment levels modestly lower, with additional job cuts likely.  The government sector will be a drag on overall U.S. employment for the next year or more.

Explain Down…Explain Up
As noted, the nation’s unemployment rate rose to 9.0% in April from 8.8% in March.  The one percent decline from November 2010 to March 2011 was the largest four-month decline in 27 years.

Just as economists tried to explain the sharp decline of the 11/10 – 3/11 period in light of essentially modest job gains, crystal ball gazers (economists) have tried in recent days to explain a rising unemployment rate in April despite more impressive job gains.

The answer is again found in widely different stories from the two primary employment surveys.  The larger “establishment” survey noted the aforementioned rise of 244,000 net new jobs.  The smaller and more volatile “household” survey (the source of the unemployment rate), which had indicated much stronger job gains in prior months than the larger survey, reported this time around that employment actually declined by 190,000 positions…I don’t make this stuff up.

Over time, the two surveys “agree” with each other.  At times of transition from meager job gains (or losses) to stronger job gains, or from strong gains to meager gains (or losses), the two surveys act like men and women…one is from Mars—the other is from Venus...

…yes, a very bad analogy

What is perhaps the most desirable approach is to rub a few months of household data together, and to take a longer-term look.  Even with the rise in April, we have seen the nation’s unemployment rate fall from 9.8% last November to 9.0% in April, a solid decline that is, again, most welcome.

Jobs By Sector 
Goods-producing employment rose by 44,000 jobs in April.  Manufacturing employment rose by 29,000 positions, with manufacturing now adding 250,000 net new jobs since December 2009.  Construction added 5,000 jobs, while mining and logging employment rose by 10,000 jobs.

Private-sector service-providing employment rose in April by 224,000 positions.  Professional & business services added 51,000 jobs, while retail trade added 57,000 jobs.  The retail trade job rise was the largest in 11 years, although a later Easter holiday may have skewed the seasonal adjustment a bit (bloomberg.com). 

US Unemployment RateFinancial activities employment rose by 4,000 positions.  The education & health services sector added 49,000 jobs, while leisure & hospitality added 46,000 jobs.  As noted before, overall government employment fell by 24,000 positions during the month.

Key Numbers
The number of people counted as unemployed rose by 205,000 in April to 13.7 million

The number of people who have been out of work for six months or more fell by 283,000 to 5.8 million in April.  How many of these people found jobs, versus how many simply stopped looking for work—and are no longer counted as unemployed—is unknown 

The number of Americans unemployed for less than five weeks jumped by 242,000 to 2.7 million, supporting weekly jobless claim numbers of recent weeks that had risen sharply  

The “underemployment” rate, that which includes the unemployed, those working part-time who would prefer to work full-time, and those discouraged workers who have left the labor force but would accept a job if one were offered, rose to 15.9% in April from 15.7% in March

From Here?
We have boosted our estimate of American job gains this year from 2.4 million to 2.6 million.  Thousands of employers, who cut employment aggressively during the Great Recession while also adding new equipment to boost productivity, have pushed about as far as they can in regard to worker output. 

Additional workers will need to be added by employers in coming months to meet the demands of solid global opportunities and what is likely to be stronger U.S. economic growth than occurred during 2011’s first quarter.  Stay tuned.


Finance Expert Right Boarder