What to Make of Today's Jobs and Unemployment Data

This morning’s April jobs numbers can only be viewed as a positive development for the national economy. 290,000 jobs gained, one hundred thousand more than expected, and 231,000 of those jobs were in the private sector. The remainder is comprised of roughly 60,000 census jobs, which are serendipitously timed. Additionally, February and March jobs numbers were revised up.

According to a blog by Council of Economic Advisors Chair Christina Romer:

The job gains were spread widely across sectors. Construction, manufacturing, professional and business services, education and health, and hospitality and leisure all added jobs. Indeed, the rise in manufacturing employment of 44,000 was the largest since August 1998. One area of weakness was state and local government, which reduced employment by 6,000. Temporary help employment grew more slowly than in previous months (+26,000), suggesting that firms may be moving to more permanent hiring. The average workweek for all employees on nonfarm payrolls increased by 1/10 of an hour and is up 3/10 of an hour since December.

This is all good news – we knew the area of weakness was in state and local governments – and the federal government can and should do more to help here. (States have to have balanced budgets, so in times like these, they end up firing people – a scenario that is highly counterproductive.) The increase in work hours is also good, as that tends to precede job growth.

At the same time as this rosy jobs news, the national unemployment level rose to 9.9 percent. Confusing, right?

Well, not really. The commonly cited unemployment rate is merely one statistic of many to help us understand the employment picture, and it’s an imperfect one. If you’re not looking for a job, you don’t play into the calculation. The virulence of this recession caused many to grow frustrated and stop looking for a job – in fact this recession has seen the highest long-term unemployment (6 months or more) of any recession since the great depression. From a statistical perspective, this uptick in the unemployment rate was unavoidable and should be seen as a positive sign – those who have been out of work for a while have grown more optimistic and are therefore out there looking. 

This isn’t to say that the economy is anywhere near out of the woods – we do have lots of people out of jobs who want them, and the economy remains vulnerable to additional shocks. The Greek debt crisis could spread; the oil spill in the Gulf could get caught in the gulfstream and end up on the East coast, hampering commerce; or we could make some foolish policy decision, like stopping stimulus spending or starting a trade war. These scenarios are unlikely, however, and we can continue to hope for continued positive employment data in the future.