May 7, 2004
Solid job growth continues in April
Today’s report from the Bureau of Labor Statistics indicates that, for the second month in a row, U.S. firms have significantly expanded their payrolls, signaling that the economic recovery is finally reaching the nation’s labor market. Payrolls grew by 288,000 in April following an upwardly revised figure that put the gains for March at 337,000. This two-month gain of 625,000 jobs represents the strongest showing since April 2000. Even the manufacturing sector, after contracting sharply for the past three years, has been expanding in recent months according to today’s revised data.
Unemployment edged down to 5.6% and the ranks of the unemployed fell by 188,000, to 8.2 million. After contracting by over 700,000 December through February, the labor force expanded by 91,000 last month and by 270,000 over the past two months, suggesting that the improving labor market may be pulling in more job seekers.
Even with these impressive job gains, the fact that this positive jobs trend is evolving so late in the recovery means that considerable labor market slack remains in place. Payrolls are down 1.6 million from their pre-recession peak, and are up only 31,000 since the recovery began in November 2001.
A positive sign about the breadth of the labor market recovery is that the job gains of the past two months have been fairly widespread across industries. In April, health services continued to be a reliable source of growth, adding 30,000 jobs, while professional services (a broad category spanning from legal and management service to temporary help) added 123,000 for its best month since October 1999. Retail trade (up 23,000) and restaurants (34,000) also had a good month, suggesting consumer demand in those sectors is effectively signaling employers to start hiring.
As noted, revised data show an end to the very long drought in factory hires. Over the past three months, manufacturing employment is up by 37,000 (21,000 in April), the first gains in the industry since July 2000. Still, these relatively small gains have put only a tiny dent in the deficit of three million jobs that developed over the past three years.
A few other indicators of labor market weakness improved in April. The number of part-time workers who would prefer full-time jobs, a measure of underemployment, fell by 159,000. Long-term unemployment—as measured by the share of job seekers whose job search has lasted at least half-a-year—fell from 23.9% in March to 22.1% in April, the lowest level since July of last year. Despite the decline, this share remains high for this point in a recovery and is a reminder that considerable slack remains in the labor market.
While hourly wage growth accelerated slightly in April, inflation has sped up recently as well. Averaging over the past three months, wages are rising at an annual rate of 2.2%. While this is an acceleration over prior months, inflation is rising even faster. Through March, the most recent data, quarterly inflation is up at an annual rate of 3.6%, meaning that the buying power of the hourly wage is declining.
The gains of the past few months suggest that the jobless recovery is solidly behind us and that the broader recovery is finally reaching the labor market. For the first time since the recession began in early 2001, overall growth appears to be strong enough to both absorb the gains in productivity and signal employers to begin hiring in earnest.
However, this new growth trend, if it persists, has arrived quite late in the recovery, and millions of workers remain un- and underemployed. Thanks to this recent acceleration of job growth, the jobs lost over the jobless recovery have been replaced, but even if payrolls continue to expand at the average of the past two months, it will be over five months before they are restored to their pre-recession levels. Of course, simply returning to the employment level in early 2001 is a very low benchmark for success, given that in every past recovery the prior employment peak had already been surpassed by this point in time.
Nevertheless, the arrival of what appears to be a bona fide labor market recovery is extremely welcome news for the nation’s working families.
By EPI senior economist Jared Bernstein
with research assistance by Yulia Fungard.
For more information on the most recent job and wage data, go to EPI’s web feature JobWatch.org.
To view archived editions of JOBS PICTURE, click here.
The Economic Policy Institute JOBS PICTURE is published each month upon release of the Bureau of Labor Statistics’ employment report.
EPI offers same-day analysis of income, price, employment, and other economic data released by U.S. government agencies. For more information, contact EPI at 202-775-8810.
