Jobs Are Returning

Popular Economics Weekly

Can we finally say jobs are returning? Nonfarm payroll employment rose by 244,000 in April, and the unemployment rate edged up to 9.0 percent, but only because more people were looking for work, according to the U.S. Bureau of Labor Statistics. This is while the change in total nonfarm payroll employment for February was revised upward from +194,000 to +235,000, and for March was revised from +216,000 to +221,000.

With commodity (oil, gas, and food) prices still sky high, the Mideast having its own revolutions, and Bin Laden dead, consumers are beginning to shop again, businesses are hiring, and even new-home construction may awaken from its coma.

This means the private sector is finally beginning to put people back to work, and it will create a virtuous cycle. Jobs = more purchasing power = more jobs = etc.

Gains were seen in goods-producing and service-providing sectors. Goods-producing jobs posted a 44,000 boost, following a 37,000 rise in March. For the latest month, manufacturing jobs increased 29,000 after a 22,000 gain in March. Even construction expanded though with a modest 5,000, following a 2,000 uptick the prior month. Mining jumped 11,000 in April.

This is while governments continued to lose jobs. Government jobs fell 24,000, following a 10,000 dip in February, while the private sector added 268,000 jobs. Private service-providing jobs increased 244,000 after a 194,000 rise in March. Trade & transportation was up 71,000 in April with 57,000 coming from retail trade. Other notable gains included professional & business services, up 51,000; health care, up 37,000; and leisure & hospitality, up 46,000.

The unemployment rate ticked up to 9.0 percent from 8.8 percent in March in the Household survey, however, because more began looking for work (+205,000). So are we finally turning the corner on unemployment? All signs point to higher growth ahead. Increased tax revenues have already pushed the debt ceiling deadline back another month, and increased tax revenues are what is needed to bring down the actual deficit as a percentage of Gross Domestic Product.

We know the economy slowed during the first quarter of 2011. However, the detail shows moderate forward momentum. First quarter GDP growth eased to a 1.8 percent annualized pace, following a 3.1 percent boost in the fourth quarter.

It was largely due to a sharp upturn in imports, says Econoday (Import totals are deducted from exports as part of the GDP calculations.), a deceleration in personal consumption, a larger decrease in federal government spending, and decelerations in nonresidential fixed investment and in exports. They were partly offset by a sharp upturn in private inventory investment.

Nonetheless, relative strength was seen in personal spending, investment in equipment & software, and inventory investment.  Exports also continued to rise although not as rapidly as earlier.  Weakness included a drop in government purchases, nonresidential structures, and residential structures. 

The good news is that consumer spending, which makes up almost 70 percent of GDP activity, is now leading the recovery, taking over from the manufacturing sector. This is in part because personal income has been increasing. Wages & salaries rose a moderate 0.3 percent in March, softening a little from 0.4 percent in February, while spending is growing at almost 5 percent annually. 

Harlan Green © 2011