Editor’s note: This post was originally published on LinkedIn by senior editor, Chip Cutter. For additional stories from Chip, you can follow what he is writing on LinkedIn. To continue the discussion around this month’s jobs report, and stay updated on insights regarding the future of jobs and the global economy, follow the LinkedIn Economic Graph Showcase Page.
The job market grew at its fastest pace in more than two years in April, while the unemployment rate fell to its lowest level since 2008. All good news for the economy, right?
Not so fast. Analysts initially cheered the April jobs report as evidence the economy had snapped out of its temporary winter slowdown in a spectacular way. Justin Wolfers, an economics professor at the University of Michigan, exclaimed: “HOT DIGGITY!” Ryan Avent of The Economist wrote: “Man, the economy should grow at 0.1% more often.”
The numbers looked impressive, at least on the surface. U.S. employers added 288,000 jobs last month, far more than the 210,000 economists had predicted. Employment gains for February and March were also revised upwards. The unemployment rate dropped to 6.3 percent, from 6.7 percent, its lowest in more than five and a half years.
But the enthusiasm waned as economists dug into the labor force participation rate, a measure of the number of Americans either working or looking for work. That figure fell to a 36-year-low of 62.8 percent, suggesting some people still feel uneasy about their chances of finding work.
If the size of the labor force remained at the same level it was in March, the unemployment rate would have actually risen to 6.85 percent instead of dropping to 6.3 percent, James Pethokoukis of the American Enterprise Institute wrote.
That may be an overly pessimistic reading, though. My colleague, John C Abell, finds a silver lining: “Perhaps people drop in to the work force when the family needs additional income, and drop out when the need is alleviated — perhaps by a main bread winner recovering to full employment, which would be excellent win-win news.”
Still, Jill Schlesinger, a LinkedIn Influencer and a CBS analyst, emphasized in a post Friday that the U.S. remains far from a “normal” labor market, in part because of the quality of jobs being created.
Nearly five years after the end of the recession, job growth is still heavily concentrated in lower-wage industries. The food services and drinking places, administrative and support services (includes temporary help), and retail trade industries are leading private sector job growth during the recovery.
Another challenge: About 3.5 million people have been out of a job for 27 weeks or longer, showing the continuing difficulties in getting the long-term unemployed back to work.
Neil Irwin, writing on The Upshot, says Friday’s report “pairs the excellent surface news with a soft underbelly.” Job growth is encouraging, but other indicators suggest that the broader labor market remains a work-in-progress.
One final note of caution: We can glean only so much from a one-month snapshot of the job market. Mohamed El-Erian, the former co-CEO of PIMCO and another LinkedIn Influencer, noted yesterday that the Federal Reserve is unlikely to make any major policy changes based on a single report. “It would take a major change in labor market conditions to alter its current policy course,” he wrote. “I don’t expect such a change.”
The lesson for us? When thinking about the health of the economy, take the long view.
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