Job Creation Strengthens, But Unemployment Increases?

American companies added 244,000 jobs to the economy in April, the fastest pace in five years.  In an ironic twist, however, the unemployment rate climbed to nine percent, according to the Department of Labor.  The unemployment rate fell to 8.8 percent in March after dropping continuously since November’s rate of 9.8 percent rate. Economists had predicted that just 186,000 jobs would be added, so the numbers show that the economy is gaining strength.  “What we’re seeing is a sustained pick-up in hiring and it suggests that businesses have gained enough confidence to look past short-term fluctuations in demand,” said Aaron Smith, a senior economist at Moody’s Analytics.

“Headwinds remain, but not enough to derail the recovery or set us back momentarily,” said Diane Swonk, chief economist at Mesirow Financial in Chicago, although she remains cautious about the outlook.  According to Swonk, the increase in new unemployment claims were reported in the weeks after the April jobs surveys.  Job losses in the public sector could intensify, with more teachers getting laid off as the school year ends and local governments deal with budget shortfalls.

The number of officially unemployed Americans totaled 13.75 million in April, an increase over the 205,000 reported in March, according to the Labor Department.  “At this point, coming out of a recession this deep, we should be getting unambiguously huge growth, of 300,000 to 400,000 (new jobs) a month,” said Heidi Shierholz, a labor economist at the Economic Policy Institute.  “And it’s just nowhere near that.  We’re still in a rocky place.”

April’s job growth was in multiple sectors.  For example, the retail industry added 57,100, approximately half at general merchandise stores.  Manufacturing added 29,000 more workers in April.  Since December 2009, factory payrolls have risen by 250,000, according to the Labor Department.  Business and professional services, whose wages tend to be higher than average, grew by 51,000, with consulting businesses, computer services and architectural firms experiencing growth.  Educational and health services, and the leisure industry, each also added nearly as many jobs.  Even the construction industry saw a small gain in April.  Government was the sole employment group that declined; its payrolls contracted by 24,000, primarily due to cuts at state and public agencies.

According to Austan Goolsbee, Chairman of the White House Council of Economic Advisers, “The last three months we’ve added more than a quarter million jobs, on average, every month.  That’s very heartening and the fact that it was, really, across a whole lot of industries.”

According to Heather Boushey, an economist at the Center for American Progress, a non-profit think tank in Washington, D.C., “We need to see job growth break above 300,000 a month and stay at that level for many months before the unemployment rate will begin to come back down.  Today’s report provides a number of data points that point toward caution in interpreting the data positively in anticipation of that level of jobs growth returning anytime soon.  The average hours worked for production and nonsupervisory employees was 33.6 hours per week in April, the same as in March.  This remains below the 2000s recovery peak of 33.9 hours per week, and far below the late 1990s peak of 34.6 hours per week.  At the same time, employers shed 2,300 temporary workers, which either means they are hiring permanent employees or they are no longer seeing an increase in demand.