Friday, May 6, 2011

FUZZY MATH: How can US add jobs but the unemployment rate go up?

U.S. Adds 244,000 Jobs in April, but Unemployment Rises
Pace of employment growth accelerates; unemployment up to 9 percent.

By Clifford Marks

U.S. employment growth accelerated last month as the economy added 244,000 jobs, but the unemployment rate rose to 9 percent, the Labor Department reported on Friday.

The report easily bested analysts' expectations for a decidedly mediocre jobs report and marked the fastest rate of employment growth since last year when census hiring inflated numbers. Private-sector growth clocked in at 268,000, the highest level since 2006. The public sector continued to lose ground, shedding 24,000 jobs in April.

Hiring in the service sector drove the gains, with sizable jumps in retail trade (up 57,000), professional and business services (up 51,000), leisure and hospitality (up 46,000), and health care (up 37,000). Goods-producing sectors showed less of a bump, and construction job levels didn't budge, a reflection of how depressed the housing market continues to be.

The number of long-term unemployed--defined as those individuals being out of work for more than 26 weeks--fell 283,000 to 5.8 million, and their share of  unemployment fell to 43.4 percent.

Payroll jobs numbers and the unemployment rate are calculated from two separate surveys, which helps explain the conflicting readings of faster job growth and higher unemployment. The precise reason for the discrepancy isn't yet clear, but the unemployment survey has a smaller sample size and tends to be more volatile than payroll numbers, which are generally a more reliable indicator of labor market health.

April's unemployment-rate rise also followed a steep, full percentage-rate drop over the prior four months, which had surprised analysts as being stronger than expected.

Although Friday's numbers certainly mark an improvement over previous reports, it will take another two and a half years before the economy reaches prerecession employment levels. How long after that it will need to add enough jobs to compensate for population growth will depend on how many people rejoin the labor force. Without question, it would be many more months.

There are some other reasons for caution, says Heather Boushey, a senior economist at the left-leaning Center for American Progress. Average hours of work didn't increase, and wages, while up nominally, didn't really rise once adjusted for inflation. "This does give me pause," she said, adding that "we really need to be seeing job growth above 300,000 to be getting the unemployment rate down."

House Speaker John Boehner, R-Ohio, welcomed the improved numbers in a statement but pointed to uncertainty as the reason the labor market hasn't improved more rapidly.

"Job growth in America is still nowhere close to what it should be," he said. "Our economy continues to suffer from the uncertainty being caused for private-sector job creators by the Democrats who run Washington."

Austan Goolsbee, head of President Obama's Council of Economic Advisers, also said that growth needed to quicken but attributed some of the improvement so far to White House initiatives such as the payroll-tax holiday and investment incentives.

These initiatives "are creating the conditions for companies to add new jobs and foster the industries of the future," he said. "We will continue to work with Congress to find ways to reduce spending, so that we can live within our means without neglecting the investments in education, infrastructure, and clean energy that will strengthen our economy."

Although the monthly job-creation estimates attract enormous attention among both investors and the general public, they are precarious numbers. The Labor Department frequently overhauls them a month later. And because the net change in new jobs per month is a minuscule fraction of all jobs in the country, the numbers are often volatile from month to month.

The Labor Department also revised upward its job-growth figures for February and March. March's increase was changed to 221,000 from 216,000. February's was raised to 235,000 from 194,000.

FLASHBACK: Biden declares: 'We're going to be creating between 250,000 and 500,000 jobs a month'...

Vice President Joe Biden predicted on Friday the U.S. economy would create 100,000 to 200,000 jobs next month, with a rise to 250,000 to 500,000 jobs per month soon afterward, according to a press pool report.

"We caught a lot of bad breaks on the way down. We're going to catch a few good breaks because of good planning on the way up," Biden told a political fundraiser in Pittsburgh, the pool report said, as he hailed the Obama administration's recovery efforts.

President Barack Obama has insisted that boosting jobs is his top domestic priority, mindful that persistently high unemployment could mean heavy losses for his Democrats in November's congressional elections.

U.S. employers created 162,000 jobs in March, the fastest rate in three years and widely seen as another sign the recovery from deep recession was moving onto solid footing.

But the unemployment rate held steady at 9.7 percent, the Labor Department said.

"All in all, we're going to be creating somewhere between 100,000 and 200,000 jobs next month, I predict," Biden was quoted as saying, while acknowledging he "got in trouble" for a job growth prediction in March.

"Even some in the White House said 'Hey, don't get ahead of yourself.' Well I'm here to tell you some time in the next couple of months we're going to be creating between 250,000 jobs a month and 500,000 jobs a month."