April Jobs Report Shows Promise
Economists had originally reported that jobs would only grow by 153,000 and that the unemployment rate would remain the same at 7.6%. Compared to the lackluster report for March, the April report showed few negatives. The labor force rose with employment increasing 293,000 and unemployment falling 83,000. Unemployment includes individuals meeting 3 tests: out-of-work, available-for-work and looking for work.
Labor force participation remained at 63.3 percent. It had been at 66% before the recession began in December 2007. The current rate is the lowest since December 1978, partly reflecting an increase in school enrolling, which could affect the “available-for-work” criteria.
The net increase in payroll jobs came despite losing 11,000 government jobs, 8,000 federal jobs, which include 3,500 postal jobs. Most industry sectors showed gains, but construction jobs fell 6,000. Most of these job losses involved non-residential construction.
Professional and business services added 73,000 jobs in April. This number includes almost 31,000 temp jobs, which are often considered an entry point into permanent employment. Temp jobs also can reflect a lack of confidence on the part of employers. The financial sector added 9,000 jobs, mostly including credit-related positions on the brink of the home-buying season. Despite this increase, real estate jobs contracted by almost 2,000.
The report reflected a weak spot in the average workweek, which slipped to 34.6 hours last month. The reduction in hours reduces average weekly earnings, which fell by $3.29 in April and will consequently have a negative impact on consumer demand.
The unemployment rate has continued to fall for 3 straight months, has added significance within the Federal Reserve. The Fed set up an inflation target to keep rates low and continue its program of purchasing mortgage securities and investing in U.S. Treasury securities. The target fed funds rate will remain at its historic low (0-¼) at least until the unemployment rate fell below 6.5%.