Disappointment on the Employment Front - May 4, 2012
At 8:30 AM (EDT) today, the U.S. Labor Department issued its monthly employment and unemployment report for April--and the news was not especially uplifting. Specifically, the data showed that job growth had sputtered for a second month in a row, with non-farm payrolls climbing by an understated 115,000. That was well under the 168,000 jobs that had been expected. That tepid increase followed a revised gain of 154,000 in March, an increase that had been initially estimated at 120,000 jobs. Also, job growth in February, initially estimated at 240,000, was revised to show a gain of 259,000. In all, employment for the months of December through February came to an average increase of 252,000 per month--a solid rate, by most standards, but one that seems a distant memory now. At the same time, the unemployment rate dipped to 8.1%. Expectations had been that this rate would have stayed unchanged at 8.2%.
Overall, employment increased last month in professional and business services, retail trade, and health care, but declined in transportation and warehousing. In the case of professional and business services, there was an aggregate employment gain of 62,000 in April, while retail trade saw its total jobs increase by 29,000. Moreover, health care added 19,000 positions, while manufacturing jobs climbed by 16,000--a welcome trend that has been fairly persistent.
Conversely, the nation lost 17,000 jobs in transportation and warehousing, while there was little overall change in such diverse industries as mining, construction, wholesale trade, and financial services.
Meanwhile, the average workweek was unchanged at 34.5 hours in April for all workers in the private arena, exclusive of farm employees, while the manufacturing workweek edged up by 0.1 hour to 40.8 hours. Also, average hourly earnings ticked up by a penny last month. Over the past year, average hourly earnings have ticked up by 1.8%.
These wrinkles, notwithstanding, this must be viewed, on the whole, as a disappointing report. True, the drop in joblessness was a step in the right direction. But some of this drop was the result of people simply leaving the workforce due to being discouraged by the long quest for employment. The slow improvement in the labor market, meantime, could get the Federal Reserve to use its limited arsenal of weapons yet one more time. The Fed has indicated that it sees the jobless rate ticking down to 7.8%-8.0% by the end of this year. Should job growth continue to sputter, and the unemployment rate not fall as forecast, the central bank could opt for a third round of quantitative easing in the months to come. Let's hope things do not come to that, given the potential inflationary costs down the road of such a policy maneuver.
At the time of this article's writing, the author did not have positions in any of the companies mentioned.