Friday, May 6, 2011

April Employment Report

The BLS reports this morning that the economy added 244,000 jobs in April, but the unemployment rate ticked up to 9% (from 8.8%).  In this case, the reason for the apparent contradiction is that the two numbers come from different surveys - the first is from a survey of firms (the "establishment survey"), and the unemployment rate from a survey of households.  The household survey reported a decrease of 190,000 in the number of people employed.  In general, the two track each other well, but may diverge in any given month; when that happens people tend to trust the establishment survey more because it has a larger sample.
Nonfarm Payrolls, Seasonally Adjusted

Overall, this report seems to be consistent with an economy digging out of a very deep hole at a very slow pace.  While the increase in 244,000 jobs more than what is needed just to keep pace with labor force growth (130,000-ish), 13.7 million people remain unemployed.  The economy is about 4.6 million jobs short of a "normal" (but still not great) unemployment rate of 6% - at this pace, we'd get there in about three and a half years.

The report also included slight upward revisions of the February and March employment numbers (41,000 and 5,000 respectively).

Average hourly earnings have increased by 1.9% over the past year.  That's more evidence that inflation is not a problem: wages should rise somewhat due to productivity growth, so that's not an inflationary number at all.

Private payrolls were up 268,000, but government shed 24,000 jobs, of which 8,000 was at the state level and 14,000 at the local level.

On a non-seasonally adjusted basis, the unemployment fell from 9.2% to 8.7% in April (i.e., this is a month with a large seasonal job increase, which the BLS tries to remove from all of the numbers discussed above, which are seasonally adjusted).


The Arthurian said...

"Average hourly earnings have increased by 1.9% over the past year. That's more evidence that inflation is not a problem..."

My friend Greg points out that when prices are going up and wages are not, it isn't an inflation problem: It is a 'cost of living' problem.

Happily, local gasoline dropped yesterday from $4.139 to $3.999. It makes me feel like dancing...

Bill C said...

Yes. If nominal (money) wages are not going up faster than inflation, real wages (purchasing power) are falling. What I was trying to say is that, due to productivity growth, wages should go up faster than prices (usually by around 1-2%), so even with no inflation, you can have wages rising; i.e., 1.9% wage growth is consistent with near-zero inflation. Since we want inflation to be around 1.5-2%, wages should be rising more like 3-4%.