Economic Indicators | Economic Growth

Large jump in private-sector jobs, but unemployment increases to 9.9%

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EPI’s Jobs Picture for May 7, 2010

This morning’s Bureau of Labor Statistics’ employment report for April 2010 showed an increase of 290,000 payroll jobs.  In its fourth straight month of gains, the private sector added a healthy 231,000 jobs in April, its largest jump in four years.   The federal government added 66,000 temporary jobs to assist with the 2010 Decennial Census.  State and local governments shed 6,000 jobs, while the federal government shed 1,000 jobs, excluding census hiring.

April’s increase in employment was not large enough to keep the unemployment rate from rising to 9.9%, as 805,000 workers entered the labor force.  The recent growth in the labor force is a partial correction to its decline in the second half of 2009, but there remains a backlog of people waiting to enter or re-enter the labor market in search of work.  How big is the backlog? Population growth alone from December 2007 to April 2010 would have added around 3.2 million workers, but instead the labor market increased by only 846,000. This means that there are now roughly 2.4 million “missing workers,” that is, workers who dropped out of (or never entered) the labor force during the downturn.  As job creation continues and these workers continue entering or re-entering the labor force in search of work, the unemployment rate will remain elevated. 

The long-term unemployment situation continued to deteriorate in April, as an additional 169,000 unemployed workers were jobless for longer than six months, for a total 6.7 million workers now unemployed for over half a year. The median, or typical, unemployment spell was 21.6 weeks (5 months), and 45.9% of all unemployed workers had been unemployed for over six months, both record highs.

The “underemployment rate” also rose (which is a more comprehensive measure of labor market slack because it includes not just the officially unemployed but also jobless workers who have given up looking for work and part-time workers who want full-time jobs), from 16.9% to 17.1%. The number of involuntary part-timers increased by 98,000 workers, and the number of “marginally attached” workers—jobless workers who have given up looking for work—increased by 117,000.  In April, there were a total of 26.9 million workers who were either unemployed or underemployed.  

The length of the average workweek increased slightly in April, from 34.0 to 34.1 hours, and is up from its low of 33.7 last fall.  Improvement in average hours is a good sign, since all else equal, it means larger paychecks for workers.  However, at the start of the recession in December 2007, the length of the average workweek in the private sector was 34.7 hours.  The reduction in average hours in the private sector since the start of the recession is equivalent to around 1.9 million jobs, so employment growth will likely be slowed until average hours catches up to near its previous peak.

Demographic breakdowns in unemployment show that while all major groups have experienced substantial increases over this downturn, men, racial and ethnic minorities, young workers, and workers with lower levels of schooling are getting hit particularly hard. 

  • In April, unemployment was 19.6% among workers age 16-24, 8.7% among workers age 25-54, and 7.0% among workers age 55+ (increases of 7.8, 4.6, and 3.8 percentage points, respectively, since the start of the recession).
  • Unemployment was 16.5% among black workers, 12.5% among Hispanic workers, and 9.0% among white workers (increases of 7.5, 6.2, and 4.6 percentage points, respectively, since the start of the recession).
  • Unemployment was 10.8% for men, compared to 8.8% for women (increases of 5.7 and 3.9 percentage points since the start of the recession).
  • For workers age 25 or older, unemployment reached 10.6% for high school educated workers and 4.9% for those with a college degree (increases of 5.9 and 2.8 percentage points, respectively, since the start of the recession).

The establishment survey (the CES) shows that the economy has added 559,000 jobs in the last three months, while the household survey (the CPS) shows employment gains of 1.1 million over this period.  Because of its much larger sample size, the establishment survey is likely closer to the truth, but we can nevertheless look to the CPS to get a sense of which demographic groups are seeing the greatest job gains. The following table shows employment changes in the household survey separately for the first two years of the recession and for the most recent three months.  Notably, employment gains are still going disproportionately to older workers, with 40.5% of the increase in employment over the last three months going to workers age 55 or over.  Also notable is the fact that all of the employment growth in the last three months has gone to workers with a high school education or less.  Recent employment gains are also going to men.  Both men and workers with lower levels of education had seen disproportionate losses in the first two years of the downturn.

Nominal hourly wage growth among all private-sector workers has been generally slowing since the summer of 2008 and is continuing to falter: nominal hourly wages grew at an extraordinarily low 0.4% annualized rate over the last three months.  With inflation at around 1.0% in recent months, this means real wages are declining. After falling faster than average hourly wage growth for the first year and a half of the recession, average weekly earnings growth has seen improvements since last summer, as average hours have improved.  Average nominal weekly earnings grew at a 1.5% annualized rate over the last three months.

April jobs gains were widespread across various industries and sectors.  Temporary help services added 26,200 jobs, the seventh straight month of gains. Manufacturing added 44,000 jobs, its fourth straight month of gains.  Manufacturing has added 101,000 since December, with durable goods manufacturing adding 88,000, and nondurable goods manufacturing adding 13,000 in that period. Retail trade added 12,400 jobs in April, while food services added 21,000.  Health care added 20,100 in April.

Construction saw an increase of 14,000 in April, which was its second month of gains, (though the March gains are questionable due to weather-effects-corrections from the February snow-storms).  Although residential construction saw declines, nonresidential and heavy/civil engineering construction each saw gains –.

While now adding jobs, the labor market remains 7.8 million payroll jobs below where it was at the start of the recession in December 2007.  And this number understates the size of the gap in the labor market by failing to take into account the fact that, simply to keep up with the growth in the working-age population, the labor market should have added around 2.9 million jobs since December 2007.  This means the labor market is now roughly 10.7 million jobs below what would restore the pre-recession unemployment rate (5.0% in December 2007).  This is an improvement from when the gap was at its worst (11.1 million in February), but the hole in the labor market remains enormous.   To fill this gap in four years, we would have to add around 325,000 jobs every month between now and then.  

This morning’s report is good news and shows healthy growth in the private sector, but there is still an enormous shortage of jobs. To end this job shortage, we will nee
d job growth at least as fast as this month’s to persist for the next four or five years.

— Research assistance from Kathryn Edwards and Andrew Green.