Jobs Data Send Mixed Messages
Heidi Shierholz
Economic Policy Institute
May 6, 2011
http://www.epi.org/publications/entry/jobs_data_send_mixed_messages

According to the employment report just released by the
Bureau of Labor Statistics, April was another strange
month of mixed messages in the labor market. The payroll
survey came in surprisingly strong, with 244,000 jobs
added.  Excluding temporary hiring for the 2010 U.S.
Census from monthly jobs numbers, April's increase was
the largest monthly gain in five years. The household
survey, however, went in the opposite direction, with
the unemployment rate increasing from 8.8% to 9.0%. This
increase in unemployment was not due to formerly
sidelined workers deciding to look for work, because the
labor force increased by only 15,000 people in April-not
nearly enough to keep up with working-age population
growth.  The rule of thumb when the payroll and
household surveys go in opposite directions is to put
more weight on the payroll survey, since it is much
larger and less volatile month-to-month. And while net
jobs growth of 244,000 is relatively good news, this
country has nearly 14 million unemployed workers, and
millions more jobless workers who have given up even
trying to find a new job. At April's job growth rate, it
would take until the fall of 2016 to get back to the
prerecession unemployment rate.  Still, payroll job
growth has exceeded 220,000 for the last three months,
700,000 in total, which indicates steady job growth that
was not apparent previously.

Though all groups are hurting, some have been hit
particularly hard

All major groups of workers have experienced substantial
increases in unemployment over the Great Recession and
its aftermath. However, young workers, workers with
lower levels of schooling, racial and ethnic minorities,
men, and workers with disabilities have gotten hit
particularly hard.

    * In April, unemployment was 17.6% among workers age
    16-24, 8.0% among workers age 25-54, and 6.5% among
    workers age 55+ (up 5.9, 3.9, and 3.3 percentage
    points, respectively, since the start of the
    recession in December 2007).

    * Among workers younger than age 25 who are not
    enrolled in school, unemployment over the last year
    averaged 21.8% for those with a high school degree
    and 9.6% for those with a college degree (reflecting
    increases of 9.8 and 4.2 percentage points,
    respectively, since 2007). The figure shows the
    unemployment rate for college graduates by age
    group. There is not close to enough demand even for
    workers fresh out of college. See the recent EPI
    report, The Class of 2011, for more information
    about the plight of today's young workers.

    * Among workers age 25 or older, unemployment in
    April was 9.7% for workers with a high school
    education and 4.5% for those with a college degree
    (up 5.0 and 2.4 percentage points, respectively,
    since the start of the recession in December 2007).

    * Unemployment in April was 16.1% for African
    American workers, 11.8% for Hispanic workers, and
    8.0% for non-Hispanic white workers (up 7.1, 5.5,
    and 3.6 percentage points, respectively, since the
    start of the recession in December 2007).

    * Unemployment was 9.4% for men, compared with 8.4%
    for women (up 4.3 and 3.5 percentage points,
    respectively, since the start of the recession in
    December 2007). 
    
    * Workers with a disability had an unemployment rate
    of 14.5% in April on a not- seasonally adjusted
    basis, compared with 8.4% for workers without a
    disability (up 1.6 and 0.0 percentage points,
    respectively, since April 2009). (April 2009 is the
    earliest April for which data are available. Data on
    labor market outcomes by disability status are
    available back to the summer of 2008.)

 The labor force, unemployment, and the employment-to-
 population ratio

The labor force participation rate held steady at 64.2%
in April, still at its lowest point of the recession.
Despite payroll job growth over the last year, the labor
force is still smaller than it was a year ago (by more
than a million workers), though the working-age
population grew by 1.9 million in that time.
Consequently, the proportion of the population in the
labor force is now 0.9 percentage points below where it
was a year ago. If the labor force participation rate
had held steady over the last year, there would be
roughly 2.3 million more workers in the labor force
right now.  Instead, they are on the sidelines. If these
workers were in the labor force and were unemployed, the
unemployment rate would be 10.3% right now instead of
9.0%. In other words, the improvement in the
unemployment rate over the last year (from 9.8% to 9.0%)
is due to would-be workers deciding to sit out.

Some have claimed that these missing workers are never
coming back, but it is far too soon to draw conclusions
on that front.  There remain 4.4 unemployed workers per
available job - far worse than the worst month of the
early-2000s recession. In this environment, where the
chances of an unemployed worker finding a job are
extremely low, the fact that the sidelined workers are
not yet reentering in search of work is no surprise.

At a time like this, with the labor force not growing at
a steady pace, we should turn to measures other than the
unemployment rate to get a sense of how the labor market
is evolving. The most basic measure is the employment-
to-population ratio, which is simply the share of the
working age population that has a job. This measure
ticked down slightly in April, from 58.5% to 58.4%.
Over the last year, it declined three-tenths of a
percentage point, from 58.7% to 58.4%.

Employers not ramping up hours, and earnings fairly flat

The length of the average workweek held steady in April
at 34.3 hours. The measure of average hours has seen net
growth of only two-tenths of an hour over the last year,
and has thus far made up just two-thirds of what it lost
in the first 18 months of the downturn (its low point
was 33.7 in June 2009). The fact that hours are still
far below where they were before the recession started
explodes the claim that businesses aren't hiring right
now for reasons other than a lack of demand. If
businesses had work to be done but weren't hiring new
workers - either because they couldn't find workers with
the right skills or because they were wary of the
potential burdens of laws like health care or regulatory
reform - they would strongly ramp up the hours of the
workers they have, which isn't happening.

Average hourly wages were relatively flat in April (+3
cents), and have grown at a 1.6% annualized rate over
the last three months and a 1.9% rate over the last
year, which is far below the wage growth rate in the
period before the recession started. Given that hours
and wages were fairly flat, weekly wages were only up
slightly in April, by $1.03.

Long-term unemployment still highest on record outside
of the current downturn

The share of unemployed workers who have been unemployed
for more than six months decreased in April, from 45.5%
to 43.4%, as the increase in unemployment in April
occurred among people who have been unemployed less than
five weeks. However, there remain 5.8 million workers
who have been unemployed for longer than six months, and
the long-term share is still the far highest on record
outside of the current downturn. This is unsurprising
given the length and severity of the Great Recession
compared with prior recessions.

Industry breakdowns show some sectors gaining less than
others

The public sector again displayed the ongoing drag of
state and local budget problems, with state government
employment losing 8,000 jobs and local government
employment dropping by 14,000.  Over the last six
months, state and local governments have shed an average
of 24,000 jobs per month, and since their employment
peak in August 2008, state and local governments have
shed nearly half a million jobs.

The private sector added 268,000 jobs in April. Of these
gains, 224,000 were in private service-providing
industries and 44,000 were in goods-producing
industries. Manufacturing gained 29,000 jobs, another
month of positive news but not as strong as the 37,000
average of the prior three months. Construction added
5,000 in April, in line with the 7,000 average gain of
the prior three months.

Temporary help services jobs dropped by 2,000, compared
with a 15,000 average gain over the prior three months,
not a promising sign. Restaurants and bars saw increased
employment in April (gaining 27,000 jobs), in line with
the sector's 24,000 average monthly gain over the prior
three months. Retail trade was a particular bright spot,
increasing by 57,000 in April, compared with a 9,000
average monthly increase over the prior three months.
Health care added 37,000 jobs, also an increase over the
25,000 jobs it added on average in the prior three
months.

Measure of underemployment deteriorates

The underemployment rate (i.e., the U-6 measure of labor
underutilization) is a more comprehensive measure of
labor market slack than the unemployment rate because it
includes not just the officially unemployed but also
jobless workers who have given up looking for work and
people who want full-time jobs but have had to settle
for part-time work. (Note, however, it does not include
people who are underemployed in the sense that they have
had to take a job that is below their skills, training,
or experience level.) This measure deteriorated in
April, to 15.9%, due to a decline in the number of
employed (-190,000), an increase in the number of
unemployed (+205,000), and an increase in the number of
involuntary-part-timers (+167,000). In April there were
a total of 24.8 million workers who were either
unemployed or underemployed.

Conclusion

In April, the labor market added 244,000 payroll jobs,
the third month of job growth exceeding 220,000.
However, the labor market remains 7.0 million payroll
jobs below where it was at the official start of the
recession three years and four months ago. Furthermore,
this number hugely understates the size of the gap in
the labor market by failing to take into account the
fact that simply keeping up with the growth in the
working-age population would have required the addition
of another 4 million jobs over this period. This means
the labor market is now 11.0 million jobs below the
level needed to restore the prerecession unemployment
rate (5.0% in December 2007). The U.S. workforce needs
the current pace of job growth to accelerate further in
order to reestablish full employment within any
reasonable timeframe.

Nicholas Finio and Andrew Green provided research
assistance.

___________________________________________

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