The Employment Situation for April – Don’t Be Distracted

Today’s Employment Situation report for April from the Bureau of Labor Statistics (BLS) provided conflicting signals about labor market conditions, with the payroll employment survey indicating a net increase of 244 thousand, including an increase of 268 thousand to private payrolls, and the household survey indicating a reduction of those employed of 190 thousand, with an increase in the unemployment rate to 9.0 percent from 8.8 percent.

Which is right?

The signals from the payroll survey are promising. Total payroll employment has shown solid growth for three consecutive months, averaging 233 thousand, and private payrolls averaging 253 thousand. If today’s increase of 244 thousand had been mirrored in the household survey the unemployment rate would have slipped to 8.7 percent instead of rising to 9.0 percent. The payroll survey is considered to be a better indicator of labor market conditions due to a much larger sample than that of the household survey, but it’s hard to dismiss the increase in the unemployment rate.

It would be better news if the rise in the unemployment rate was the result of discouraged workers returning to the labor force, a signal of their increased confidence in the ability to find a job, but that’s not the case. The labor force increased by 15 thousand, the number of employed persons declined by 190 thousand, resulting in a 205 thousand increase in the number of unemployed persons and the 0.2 percentage point increase in the unemployment rate.

But rather than being distracted by trying to reconcile today’s numbers, or discussions of which survey is “right,” or whether this is a turning point (in either direction) in the progress of labor market recovery (it probably isn’t). We should recognize the big picture that 22 months into the recovery, private payroll employment appears to be finally sustaining the growth necessary to reduce the still uncomfortably high unemployment rate, but at the same time, the government sector (primarily state and local), roughly 16 percent of total payroll employment, is still contracting with little sign of near-term recovery based on the condition of federal, state and local government budgets. Today’s conflicting labor market signals may generate more heated discussion, rather than shedding much light on the subject, but that’s not a problem. The condition of the current employment situation is pretty clear: weak.



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