While the U.S. unemployment rate in April was the lowest it's been in more than three years, the unemployed may simply be falling off the government's radar as they give up looking for work.
Meanwhile, job growth has slowed sharply after a fast start to the year, suggesting another bump in what has been an agonizingly long road to recovery for the job market.
Unemployment fell to 8.1 percent in April, the lowest since January 2009, the Bureau of Labor Statistics reported Friday morning. But the decline was mainly due to 342,000 people leaving the labor force, meaning the BLS had stopped counting them as unemployed. The number of employed people in the nation actually fell by 169,000.
Nonfarm employers added 115,000 jobs to their payrolls in April, according to a survey of businesses that is different than the household survey that generates the unemployment rate. That job growth was lower than the 170,000 or so economists had expected, though the BLS revised upward the number of jobs that were created in February and March, adding about 53,000 additional jobs to payrolls.
About 12.5 million people are still unemployed, and a record 88.4 million people are considered "not in the labor force," according to the BLS. The labor-force participation rate -- the percentage of the work-age population either working or looking for work -- dropped to 63.6 percent, the lowest since December 1981.
"It's hard to see the good news here," David Semmens, senior U.S. economist at Standard Chartered, wrote in a research note.
The stock market reeled on the news, which suggested the economy is still sluggish, but not so weak that the Federal Reserve will leap to its aid any time soon with fresh stimulus. The Dow Jones Industrial Average was recently down more than 120 points, or 0.9 percent, to about 13,083, while the Standard & Poor's 500-stock index was down more than one percent.
The sluggish recovery is an obstacle to the re-election chances of President Obama this fall and a boon to his Republican challenger, Mitt Romney, who told Fox News the April jobs report was "terrible and very disappointing."
The White House pointed out that the job recovery is the legacy of a recession that started on the Bush administration's watch.
"Much more remains to be done to repair the damage caused by the financial crisis and the deep recession," wrote Alan Krueger, chairman of the White House's Council of Economic Advisers, in a statement. "It is critical that we continue the economic policies that are helping us dig our way out of the deep hole that was caused by the severe recession that began at the end of 2007."
Critics on the left, such as Princeton economist Paul Krugman, have argued that the Obama administration has not done enough to spark demand, while critics on the right, including Romney, argue the administration has hindered the recovery with too many regulations. Many economists tend to believe such a sluggish recovery was perhaps inevitable following the bursting of the housing bubble and a severe recession.
"While some would like to attribute the lack of hiring to uncertainty and regulatory roadblocks, the fact is that demand for goods and services simply has not reached a level that warrants accelerated hiring," John Challenger, CEO of consulting firm Challenger Gray & Christmas, wrote in an email. "In areas, where demand has improved, so has hiring."
Whatever the reason, U.S. payrolls are still nearly 5 million jobs lower than they were when the recession began. This labor-market recovery has been arguably the most sluggish since World War II -- though the job losses in the recession were also the deepest.
More than 5 million people have been unemployed for 27 weeks or more, and the average length of unemployment is more than 39 weeks, according to the BLS.
Many workers are leaving the labor force because of retirement or to collect Social Security disability checks. But an untold number have simply given up looking for work after long months or years of unemployment.
"If someone spends two years sending out resumes with almost no response, don't I give up or go back to school?" Bank of America Merrill Lynch economist Neil Dutta wrote in a note.
A broader government measure of unemployment, which includes people described as "marginally attached" to the labor force -- people who have given up looking but would still like a job, or who are working part-time because they can't find anything better -- held steady at 14.5 percent. The situation is particularly grim for African-Americans, with a 13 percent unemployment rate, and teens, with a 24.9 percent unemployment rate. The unemployment rate is 13.2 percent for Americans aged 20 to 24, suggesting a particularly tough job market for college graduates.
And the prospects for work seem to have weakened abruptly in recent months. Monthly job gains have slowed in each month of the year, from 275,000 in January to 259,000 in February and 154,000 in March.'
Many economists believe that unusually warm winter weather made hiring stronger than usual in the winter months, pulling activity forward from the early spring. Recent disappointing job numbers may be payback for the earlier months' strength, in other words. According to this theory, job growth should pick back up again once the weather effects wane.
The three-month average of job growth has been 176,000 jobs per month, the Economic Policy Institute pointed out. While that's more than enough to keep unemployment from rising, it's still not good enough, given the deep hole the job market is still in.
"The labor market continues to very slowly improve," the EPI wrote in a press release, "but it is a far cry from the 300,000 or 400,000 jobs we would need per month to get back to full employment in a reasonable timeframe."
Some economists took heart at some signs of strength in the business survey. Retailers added 29,000 jobs, while temporary services added more than 21,000 workers. An increase in temp workers is sometimes a sign that businesses are getting ready to make more permanent hires.
Other details of the business survey were less encouraging: The average length of the work week was flat at 34.5 hours, while average hourly earnings rose by just a penny to $23.38.
Over the past year, hourly earnings have risen by just 1.8 percent, the BLS said -- not even enough to keep up with inflation.
"Weak job growth and weak income growth is most unwelcome," Dan Greenhaus, chief global strategist at BTIG, a trading firm in New York, wrote in a research note, "especially at a time when so many were banking on the exact opposite."
Update: This story has been updated with additional quotes and details throughout along with the stock-market reaction. It has also been corrected: There were 12.5 million people unemployed in April. An earlier version of the story incorrectly said 11.9 million people were unemployed.
From Motoko Rich, economics reporter at The New York Times:
|@ motokorich : Average duration of unemployment for over-55s rises to 60 weeks, highest recorded|
The S&P 500 plunged 1.20 percent on Friday as of 10:41 a.m. ET, according to Thomason Reuters.
Stocks have been growing more than the economy itself, according to a recent SmartMoney analysis cited by money manager Barry Ritholtz.
From a blog post by Dean Baker, co-director of the Center for Economic and Policy Research:
By demographic group, the worst story is among black men and black teens. The former has an EPOP [employment-to-population ratio] that is 6.5 percentage points below its pre-recession level. Black teens have an EPOP of 15.5 percent, down 9.0 percentage points from the 2006 level. The EPOP for black women is down 3.7 percentage points from its pre-recession level, but has risen 3.2 percentage points from lows hit last summer.
Neil Dutta, U.S. economist at Bank of America, wrote in a research note that the falling labor force is not at all "structural," or due to retiring Baby Boomers:
Many market pundits argue that this decline is structural and permanent, simply a function of retirees going ahead with their retirement. We are skeptical. The drop in the participation rate is happening in many age cohorts. Population shifts into historically lower age ranges is a small slow-moving factor that will extend over a generational period of 25 years or so. Moreover, the permanent drop argument ignores the shock to household wealth and confidence.
From Sudeep Reddy, economics reporter at The Wall Street Journal:
|@ Reddy : Government jobs down by 607,000 since Obama took office, all due to state & local cuts. Federal govt jobs up by 31,000. http://t.co/QIo56dlK|
The jobless rate for African-Americans, who have much higher jobless rates than the rest of the population, plunged from 14.0 percent in March to 13.0 percent in April, according to the Labor Department. The Labor Department does not specify whether this is because 200,000 African-Americans gave up on looking for jobs or found new jobs. But since the number of employed people plunged in April, it probably is because many African-Americans dropped out of the labor force.
From a research note by Nigel Gault, chief U.S. economist at IHS Global Insight:
The employment deceleration in part results from warm winter weather that pulled some hiring forward, producing a payback now. For that reason we think that the March and April payroll figures understate the pace of recovery, and we look for a better but still subdued pace of job creation in the 150,000-200,000 region over the rest of the year. If that's right, the Fed probably won't be tempted to launch QE3.
John Silvia, chief economist at Wells Fargo Securities, wrote in a research note that Americans need to develop their job skills in order to be competitive in the 21st century economy. From his research note, which was just released:
The larger issue, from our view, is that many workers do not have the skills required by employers in the location where employers are seeking jobs, causing long spells of unemployment or a withdrawal from the labor force. The wide disparity in unemployment by education reflects the altered state of labor demand in the 21st century compared to the romanticized labor market of the three decades after WWII when the manufacturing of durable goods, associated with the post-war consumer boom and limited gains in technology, created an outsized demand for low- and semi-skilled workers that simply has diminished today. This structural unemployment will require more job-specific skills development.
From Pedro da Costa, who covers the Federal Reserve for Reuters:
|@ pdacosta : Today's weak number not likely enough to trigger QE3 from Fed. Another two or three months around these levels, however, might be.|
That has barely changed since last year, according to Arthur Delaney, unemployment reporter at The Huffington Post:
|@ ArthurDelaneyHP : 1.8 million out of work 99 weeks or longer in April; 1.9 million this time last year. :(|
From Nouriel Roubini, economics professor at New York University:
|@ Nouriel : Employment report confirms that the U.S. recovery is anemic and fragile. Details are also weak as earnings and workweek are flat|
Republican presidential candidate Mitt Romney criticized the jobs report this morning on Fox, according to The Wall Street Journal. From the WSJ:
"It's a terrible and very disappointing report this morning," Mr. Romney said in an interview with Fox & Friends Friday morning. "We seem to be slowing down not speeding up. This is not progress."
Here is a statement from Paul Conway, president of Generation Opportunity and former chief of staff of the Labor Department:
These numbers tell a heartbreaking story about the reality young Americans face each day. Young Americans continue to suffer the impacts of the President and his administration’s bad economic policies, the resulting poor economy, and the overall lack of opportunity. The administration has failed to listen closely to the needs of young adults – they want meaningful, full-time jobs in a career path of their choice to get on with their own lives. Instead, the Obama administration continues to push a vision that offers less hope and less opportunity. And all the while, administration officials appear on college campuses and at gatherings of young Americans across the country to brag about how the federal government is expanding to take over more of their healthcare, education, job training, and other decisions – where is the hope in that?
Here is an excerpt from a statement just released from Alan Krueger, chairman of the White House's Council of Economic Advisers:
Much more remains to be done to repair the damage caused by the financial crisis and the deep recession. It is critical that we continue the economic policies that are helping us dig our way out of the deep hole that was caused by the severe recession that began at the end of 2007. President Obama has said that prosperity in America has always come from a strong and growing middle class. He has made clear that getting back to where we were is not enough. We need to do more, which is why the President has laid out his blueprint for an American economy that is built to last and will continue to urge Congress to act to do more to grow the economy and create jobs.
This chart is just petrifying. The participation rate started falling after the dot-com bust, leveled off during the credit boom (but never really rose much), and then fell off a cliff when the recession started. You’d think it would have started to bounce back up by now, but no. Instead, we’re now deep into pretty much unprecedented territory.
From Justin Wolfers, economics professor at the University of Pennsylvania:
|@ justinwolfers : When 106% of jobs lost since January 2009 are in the public sector, should we conclude the stimulus failed, or we never really tried it?|
From Phil Izzo, an economics editor at The Wall Street Journal:
In April, the number of unemployed dropped by 173,000, but so did the number of people employed — by 169,000. That indicates that those people didn’t necessarily find new jobs, since the overall labor force declined by 342,000.... Meanwhile, the broader unemployment rate, known as the “U-6″ for its data classification by the Labor Department, was unchanged in April.
Most new jobs have gone to Americans with at least some college education, according to Stephen Bronars, senior economist at Welch Consulting:
|@ SBronars : April #jobs report: employment gains past 12 months by educ group. High school diploma or less +48k, some college +500k, college plus +1266k|
Barclays Capital notes in a research note that all the net job gains came from the private sector: Private businesses hired 130,000 people, while the government let go of 15,000 workers:
Private payrolls increased by 130k, with the bulk coming from private services at 116k. Gains were strongest in business services (62k), retail trade (29k), education and health (23k), and trade and transport (22k).... The public sector shed 15k jobs, in line with our expectation (-10k).
John Challenger, CEO of Challenger, Gray & Christmas, just released this statement:
Even at its best, job creation is falling well short of what is needed to make a substantial dent in unemployment. While some would like to attribute the lack of hiring to uncertainty and regulatory roadblocks, the fact is that demand for goods and services simply has not reached a level that warrants accelerated hiring.
|@ ReformedBroker : US Stocks Set to Hilariously Rally on Terrible Labor Market Report $$|
|@ thinkprogress : FACT: April was the 26th straight month of private sector job gains. http://t.co/6U9I2ELx|
Check out the third graph in this blog post on Calculated Risk, comparing this jobs recovery to every jobs recovery since World War II. (H/t Business Insider.) It's not pretty.
From Peter Goodman, executive business editor of The Huffington Post:
|@ petersgoodman : magic? Like make lousy job market disappear in a hum of punditry? @CharlesMBlow: Unemployment rate ticked down to 8.1%, closer to magic 8%|
|@ counterparties : #FF --> RT @justinwolfers: This morning's jobs tweeting brought to you in my racing car pajamas... How 'bout a #FF if you enjoyed?|
|@ BuzzFeedAndrew : RT @grynbaum: Want the @MikeBloomberg angle on the jobs report? Of course you do. He says: "This is not good news."|
From Paul Ashworth, chief U.S. economist at Capital Economics:
...The labour force fell by an even bigger 342,000. The participation rate slipped from 63.8% to 63.6% last month, which is a 30-year low. Normally we would characterise the contraction in the labour force as a big negative, presumably a result of job seekers becoming so disillusioned they give up. But it is worth remembering that this is a volatile series and the labour force increased by almost 1,000,000 in the first two months of the year, so some drop back was to be expected.
From Stephen Bronars, senior economist at Welch Consulting:
|@ SBronars : .@Neil_Irwin Emp/Pop Lower than April 2010 same as April 2011. Emp growth keeping pace with pop growth, not replacing jobs lost in recession|
|@ umairh : hehe RT @justinwolfers: The worst part of today's jobs report? It provides just enough inane talking points for both sides of politics.|
From Sara Eisen, Bloomberg TV's markets reporter:
|@ saraeisenFX : Labor market participation rate drops to 64%, lowest since 1981|
To be precise, the labor market participation rate now is 63.6 percent, according to the Labor Department.