Job growth slowed in April. The labor force shrank. The unemployment rate didn’t budge, dashing economists’ expectations for improvement. Friday’s jobs report was, in sum, a disappointment.
But take a step back and a rosier picture emerges. The job market is what we thought it was: strong, and steadily getting stronger. It may have cooled a bit in April; more likely, it wasn’t quite as hot in the first three months of the year as the initial numbers made it appear. But there is no sign that the economy’s record-setting run of job growth is anywhere close to finished.
U.S. employers added 160,000 jobs in April, the Bureau of Labor Statistics reported Friday. That’s the slowest growth since September and is a bit weaker than the roughly 200,000 jobs that economists were expecting. But by most measures, it still represents solid growth, more than enough to keep up with population growth. And the overall trend is steady: The economy has added 2.7 million jobs over the past year, pretty much the same rate as in the first three months of the year.
More worrying, perhaps, was the decline in the labor force after six months of gains. The number of people working or actively looking for work fell by 362,000 in April, pushing the so-called participation rate down two-tenths of a point to 62.8 percent. The recent rise in participation had suggested that the economy was finally pulling Americans off the economy’s sidelines, so April’s reversal is a disappointment. But here, too, perspective is important: The rebound in the labor force had been much faster than most economists expected, so a slowdown is hardly surprising. Overall, the participation rate gave back only about a third of its recent gains.
Meanwhile, the number that might matter most to workers — how much they earn — showed significant improvement in April. Average earnings rose 8 cents an hour to $25.53 and are up 2.5 percent over the past year. That’s hardly spectacular, but it represents clear improvement from the middle of last year, when economists were puzzling over how wage growth could be so weak with unemployment so low.
It’s tempting to conclude that the three trends — slowing job growth, an end to the rise in labor force participation and accelerating wage growth — are connected. And it’s true that those trends are consistent with an economy that is nearing “full employment,” the point at which pretty much everyone who wants a job has one and employers are forced to pay more to attract workers. But it’s risky to read too much into one month’s numbers; any of those trends, or even all three, could reverse next month.
Instead, the safest interpretation of the latest numbers is that the job market remains where it has been for much of the past year: Job growth is solid, wages are rising and unemployment remains in check. That isn’t a bad place to be.
Here are a few more observations about today’s report:
Flat unemployment: From October 2013 to October 2015, the unemployment rate fell 2.2 percentage points, a faster drop than most economists expected. Since then, though, it has flatlined, holding basically steady at 5 percent for the past seven months. (It ticked down to 4.9 percent at the start of the year and then bounced back up.) Last month, the rise in the unemployment rate was for “good” reasons, as more Americans entered the labor force to look for work. This month, the trend is less positive: Fewer people were working in April than in March, and while the number of unemployed also fell, that was largely because fewer people restarted their job searches. A broader measure of un- and underemployment, which includes those who have given up their job searches and those stuck in part-time work involuntarily, shows a similar pattern.
Negative revisions: Employers added 19,000 fewer jobs in February and March than initially thought. But both months still look strong, with job gains above 200,000. Overall, the economy has added jobs for 67 straight months, the longest such streak on record; the private sector has done even better, adding jobs for 74 months in a row, also a record.
The job gains were spread across the economy, with the high-paying professional and financial sectors posting strong gains alongside the lower-paying leisure and hospitality industry. Employment in the manufacturing and construction sectors was basically flat, while oil and gas producers continued to cut jobs amid low prices. One sector to keep an eye on: retail, which trimmed jobs in April and could show further declines in coming months given signs of a downturn.
Good things to come: Despite Friday’s disappointing figures, there were signs that job growth should continue in coming months. Average hours rose, as did temporary employment. Both indicators can suggest that employers need more labor, even if they aren’t yet hiring permanent workers. Meanwhile, companies don’t seem to be cutting staff: New claims for unemployment insurance are at their lowest level since Bill Clinton was president, and the number of people unemployed because they lost their jobs — as opposed to because they quit or entered the job market — barely rose in April.
More stay on the sidelines: One of the most significant trends in recent months has been the increasing number of Americans rejoining the labor force with a job. That trend came to a screeching halt in April. In fact, the drop in the number of people transitioning from “not in the labor force” to “employed” was so dramatic that it looks like an anomaly — don’t be surprised if the number jumps back up in May. Meanwhile, the number of people entering the labor force as “unemployed” — that is, starting or restarting a job search — held to its recent downward trend.
