Jobless Rate Falls to Four-Year Low in April
Unemployment is down to a four-year low as the U.S. economy steams ahead in turbulent times.
The U.S. economy continues to steam ahead amid turbulent seas. Or at least that’s my takeaway from Friday morning’s job report.
The economy added 165,000 payroll jobs in April—good, but not great, though better than many analysts expected. Strength was seen in business and professional services (73,000 new jobs), food and drinking establishments (38,000), and retail (29,000). You don’t need to have a Ph.D. in economics to understand how more people working at more jobs for slightly more pay leads to increased demand, which in turn leads to hiring. Compared with a year ago, then, there are 2.077 million more Americans with payroll jobs. That’s not enough to claw back all the jobs lost in 2008 and 2009—the last time there were this many private-sector workers was back in September 2008, before the Lehman Brothers crisis. But the jobs numbers are moving in the right direction.
The unemployment rate, which is calculated from the separate Bureau of Labor Statistics household survey, fell from 7.6 percent in March to 7.5 percent in April. Now, in past months, analysts have been quick to dismiss declines in the unemployment rate when the decline is a function of people leaving the labor force. (After all, if the labor force declines, the unemployment rate could fall even if the number of people who say they’re working stays the same.) But in fact, in April the labor force grew by more than 200,000 from March. And it is up by nearly 800,000 from a year ago. More people are looking for work and more people are finding it. The number of people in the household survey reporting themselves as being employed rose by 291,000 in April.
While it looks pretty good at first blush, the April jobs figure is likely to look even better in hindsight. After reporting the monthly figure, the BLS then revises the figure in each of the next two months. And since the economy began growing again in 2009, the trend has generally been for BLS to revise these figures higher. Justin Wolfers of the University of Michigan noted that over the course of 2010, BLS added 480,000 jobs through such revisions, 340,000 in 2011, and 330,000 in 2012. So far, this year is no different. The February figure, originally reported as 236,000, was revised upward to 268,000 in March. Today, the BLS revised that figure up to an impressive 332,000. March’s payroll-jobs figure, originally reported as an anemic gain of 88,000, was revised to 136,000. In effect, BLS discovered an additional 114,000 jobs in the economy.
The jobs growth is good. But wage growth is less impressive. One of the major—and frustrating—features of this recovery has been that capital is beating the living daylights out of labor. Companies have been able to rack up record profits and are demanding that employers work harder and more productively without necessarily paying them more. Why? There’s a lot of slack in the labor force, unions have declined in power, and there’s a pervasive sense among CEOs that they just don’t need to pay more. This trend continued last month. “In April,” BLS noted, “average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $23.87. Over the year, average hourly earnings have risen by 45 cents, or 1.9 percent.” That’s weak. And we are nearing a point where we will really need companies to start giving it up if the expansion is going to continue.
Why? Well, fiscal policy—the sequester, declining defense spending, higher taxes—is now acting as a drag on the economy. April was the first full month in which the effects of the sequester would be seen in employment. The federal government cut 8,000 jobs in April. More broadly, what I’ve dubbed the “conservative recovery” is still intact. Each month for the past three years, the private sector has added positions, and each month for the last three years, the public sector—federal, state, and local government—cuts jobs.
This dynamic usually doesn’t happen in an economic expansion. But it’s been going on for a few years thanks to austerity at the federal level and the continual needs of state and local governments to balance their budgets. In April, while the private sector added 176,000 jobs, the public sector cut 11,000 jobs—8,000 from federal payrolls, 1,000 from state payrolls, and 2,000 from local government payrolls. The budget picture may be improving across the country, but it’s not leading to more government employment yet. Since February 2010, the private sector has added 6.78 million jobs. Since May 2010, the public sector has cut 1.147 million jobs.
Some call it socialism.