In April, total employment rose by 290,000, which was far above consensus expectations for growth of 188,000. The job gains were helped by the addition of 66,000 temporary census jobs, but that hiring was figured into the consensus estimates and was actually smaller than most people had been expecting. The bulk of the job gain in April came from the private sector, which added 231,000 jobs. In addition, there were huge upward revisions to the jobs numbers for both March and April.

The economy added 230,000 jobs in March, rather than the 162,000 that were reported last month, and February was revised up for the second time, with the total now pegged at an addition of 39,000 jobs. Last month it was pegged at a loss of 14,000 jobs in February, and when the February numbers were first released they were reported as a decline of 36,000 jobs. The upward revisions to March were mostly from the private sector, which is now seen as adding 174,000 jobs in March rather than the original 123,000. That accelerated to a gain of 231,000 private sector job additions in April.

On a year-over-year basis, employment is now down 1.0%; at the worst point in the downturn, total jobs were down 5.0% year over year. As shown in the first graph below (from http://www.calculatedriskblog.com/), it is very plausible that year-over-year jobs growth could turn positive within the next few months. That is in large part because of just how awful the jobs losses were last year, and those will be rolling off the year-over-year calculations. A year ago in April, the economy lost a total of 528,000 jobs, and even worse, it lost 649,000 private sector jobs.

The job gains were widespread. The goods-producing sector added 65,000 jobs, up from 55,000 in March. The goods-producing sector was particularly hard hit, as it is in most recessions. A year ago it lost 277,000 jobs in just one month. Within the goods-producing sector, even construction registered an increase of 14,000 jobs; its second positive month in a row. I’m skeptical about the construction number and would not be surprised to see it revised away, although the gain of 26,000 construction jobs in March might have been aided by a snapback from jobs lost temporarily due to the snow storms in February. I can’t see that effect lasting into April. A year ago the construction industry shed 114,000 jobs. Manufacturing added 44,000 jobs on top of gains of 19,000 in March and 16,000 in February. That’s a huge turnaround from the 149,000 manufacturing jobs lost in April of 2009.

The service sector, which is vastly larger than the goods-producing sector, added 166,000 new jobs in April on top of 119,000 in March and 90,000 in February. It is a stark contrast to the 372,000 private sector service jobs lost a year ago. Particularly noteworthy is the fact that temporary jobs continue to rise, although the pace is slowing a bit. Temp agencies like Kelly Services (KELYA) and Manpower (MAN) added 26,200 employees in April, on top of 32,400 in March and 35,900 in February. It is not that these are particularly superior jobs, but they are a very important indicator. When business starts to pick up, the first thing the employer will do is try to work its current employees harder, particularly if they had been put on reduced hours during the slowdown. The employer really doesn’t know if it is just a temporary bounce or the start of a sustained uptrend in business. Thus he is reluctant to go out and hire a full time permanent employee, particularly if the job provides substantial benefits. Thus as soon as he has his current workforce doing all they can, he will bring on a temp.

Thus temp employees are considered excellent leading indicators of future permanent job trends. That other indicator, the length of the average work week (the boss working the current employees more) rose for the second month in a row to 34.1 hours from 34.0 hours in March and 33.9 hours in February. It was also well above the 33.9 hours a year ago. A 0.1 hour increase in the average workweek does not sound all that significant: after all, it’s only 6 minutes. However, if you multiply it across the 130,161 million people who are working in the country, it adds up. In terms of output, it is like adding an additional 40,000 jobs. Combined, the rise in the temporary workforce, and the rise in the average workweek point to more jobs gains ahead in May and June.

The job report numbers come from a survey of employers. There is a separate survey of households that is used to calculate the unemployment rate. In that survey the picture gets more complicated. The unemployment rate rose to 9.9% from 9.7%, even though the household survey recorded an even bigger jump in the number of people working, with a rise of 550,000 on top of 264,000 jobs added last month. It also recorded an increase in the number of unemployed both this month and last month, with the total number of people out of work rising to 15.260 million from 15.005 million (up 255,000) in March, which was in turn up from 14,871 million in February (up 134,000). The official (U-3) unemployment rate does not fully reflect the pain out there. There are also a lot of discouraged workers and also people that would like to work full time, but can only find part time work. Once those people are counted, the rate (the under-employment rate if you will, or U-6) rose to 17.1% from 16.9% in March and up from 15.8% a year ago.

The reason is that the size of the labor force, both the employed and the unemployed, is expanding. People who previously thought it was not even worth looking for a job because the economy was so dismal, now at least think it is worth giving it a shot. The percentage of the population that is actually in the work force, known as the civilian participation rate, rose to 65.2% from 64.9% in March and 64.8% in February. While the participation rate is still well below the 65.8% rate of a year ago, it is now up for four months in a row. The percentage of people who are actually employed also increased. The employment rate (or Employment to Population ratio) rose to 58.8% from 58.6% in March and 58.5% in February, although it too is well below both the year-ago level of 59.9% and far lower than its all-time peak set back in April of 2000 when it hit 64.7%.

The employment rate is a greatly under reported statistic that is very important. Ultimately it is the people who are working that support the whole population. The unemployment rate can be seen as the difference (technically the ratio) between the participation rate and the employment rate. The participation rate will always be higher than the employment rate, and the participation rate will never get close to 100%, unless you expect all those lazy toddlers to get up off their butts and bring home a paycheck. The highest it ever hit was also in April 2000 at 67.3%. Due to two major demographic forces, the baby boomers and the entrance of women into the workforce, both the participation rate and the employment rate were in a secular uptrend starting in the mid 1960s and going through the end of the 20th century.

A rising participation rate means that the economy has to generate a lot more jobs to get the same level of unemployment. Notice in the first graph above that very anemic job growth in the last expansion, which only briefly got to 2.0% year-over-year job growth but was enough to push the unemployment rate under 5%, while in the late 1970s and early 1980s even sustained year-over-year job growth of over 4% and touching over 5% resulted in unemployment rates of closer to 6%. The history of the employment rate is shown in the second graph (also from http://www.calculatedriskblog.com/). The plunge in the employment rate during this recession was really more significant than the rise in the unemployment rate, although in that case they were telling much the same story. The increase in the employment rate now really is more significant than the increase in the unemployment rate, even though the unemployment rate is going to get a lot more headlines. While the recent rebound in the employment rate is welcome news, it is also clear that we have a very long way to go to make up for the plunge during the downturn.

While this report clearly shows that the economy is on the right track, all is not sweetness and light. One of the defining attributes of this recession relative to all the previous post war recessions is that once someone loses a job, they tend to stay unemployed for an extremely long time. The BLS reports four different categories of unemployed, based on how long they have been out of work. The rate of short term unemployed, those that have been out of work for less than five weeks, actually rose by 36,000 in April, but is down 602,000 from a year ago. The number of people in the two intermediate categories of unemployment declined on both a month-to-month and a year-to-year basis. The number of people out of work between five weeks and 14 weeks fell to 2,991 million, a decline of 237,000 from March and down 971,000 from a year ago. Those out of work for between 15 and 26 weeks fell by 183,000 in April from March and are down 318,000 from a year ago.

The real problem is in the number of long term unemployed; those out of work for more than six months. These are the people for which unemployment has inflicted by far the most damage. Long-term unemployed totaled 6.716 million in April, or 45.9% of all the unemployed. That is a rise of 169,000 from March and an astounding increase of 2.991 million over the year. Half of all the unemployed have now been out of work for 21.6 weeks, up from 20.0 weeks from last month and just 13.1 weeks a year ago. The average length of unemployment (which will always be higher than the median since it is not possible to be unemployed for fewer than zero weeks) jumped to 33.0 weeks from 31.2 weeks last month and 21.8 months a year ago. As is shown in the third graph below, a year ago the rates were already pushing on record levels. Now the charts have to be redrawn each month.

Being out of work for less than a month might be an inconvenience, but it is more like an unscheduled vacation and really does not affect ones’ long-term prospects or their financial stability. Being out of work for more than six months is a very different situation. Once you have been looking that long, you have probably already depleted your savings (and nationwide the savings rate going into the recession was at dangerously low levels, not just in terms of a financial cushion, but in terms of what the country needs for investment). You have probably already maxed out your credit cards. In previous downturns it was generally possible to borrow against the equity in your house if you were one of the unlucky few who were out of work for a very long time. This time around millions of people owe more on their mortgages than the houses are worth, and even if there is a narrow cushion of equity in a house, banks will be very reluctant to grant home equity loans to unemployed people, especially with housing prices still declining in many areas of the country (although they have stabilized and started to rise in other parts of the country, but that is probably in large part due to the government support programs like the tax credit and the Fed buying of mortgage paper, both of which have now ended).

Regular unemployment benefits are paid by the state unemployment insurance funds, but those run out after 26 weeks. After those run out, people turn to the extended benefits programs that are funded by the federal government, and there are now far more people on extended benefits than there are on regular unemployment benefits. Without the extended benefits, many of these people would sink into third world-type poverty, with no income and no assets. However, the extended benefits are one of the fastest-increasing line items in the federal budget, and a major contributor to the deficits. The fact that these people are not going to be earning a lot of income and thus paying income taxes is another major contributor to the deficits.

Recessions always hit unevenly, and generally those on the fringes of society tend to be hurt the most, but they tend to “benefit” the most when things start to pick up, at least in terms of changes. The unemployment rate for high school drop outs rose to 14.7% from 14.5% in March, but is down from 14.9% a year ago. Those that managed to graduate from high school, but who didn’t go on to college, saw their unemployment rate drop to 10.6% from 10.8% in March, but it is up from 9.4% a year ago. Those who went to college but didn’t finish or only got an associate degree saw their unemployment rate tick up to 8.3% from 8.2% in March and from 7.5% a year ago. The unemployment rate for those with a four-year degree or more held steady at 4.9% and is up from 4.4% a year ago.

The unemployment rate for whites was 9.0% in April, up from 8.8% in March and 8.1% a year ago. For Latinos, the unemployment rate fell to 12.5% from 12.6% in March but is up from 11.4% a year ago. For blacks, the unemployment rate held steady at 16.5% but is up from 15.0% a year ago. This recession has hit men harder than it has hit women, with a male unemployment rate of 10.1% in April up from 10.0% in each of the previous two months and from 9.4% a year ago. For women, the rate rose to 8.2% from the 8.0% in March and February and up from 7.2% a year ago. Teen unemployment rates showed some improvement but remain very high at 25.4%, down from 26.1% in March but up from 21.8% a year ago. The black teen unemployment rate is still at a horrifying level of 37.3%, but that is a substantial improvement from the 41.1% level in March but up from 35.1% a year ago. White teen unemployment is much lower, but still high at 23.5%, down from 23.7% in March but up from 20.0% a year ago.

While this is a very encouraging report, we should not forget just how deep and nasty this recession was. It was far worse than anything we have seen since the Great Depression.. We have had sharp pullbacks in the total number of jobs before, but generally they were for very short periods of time, and pretty soon the economy had more people working than it did before the recession started. The last two recessions (1990 and 2001) were protracted affairs where it took a very long time for jobs to recover to pre recession levels, but the depth of the recession was not that bad. This recession is by far the deepest on record (not very good data prior to WWII), and in all probability will take the longest time between the start of the recession and when we surpass the previous employment high. Indeed, with the exception of the last two recessions, by this point, 27 months after the recession started, we had already reached new employment highs. This downturn was three times as deep in terms of the percentage of total jobs lost than the 2001 recession, and four times as deep as the 1991 downturn. We are still 7.72 million below the peak level of employment in November of 2007. Even if we can maintain the April level of job creation, it would take us more than 26 months to make up those losses, and that does not even factor in the number of people who have joined the labor force due to population growth. We are headed in the right direction, but still have a long journey ahead of us.

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