the employment situation

I think Wall Street is overlooking the substantial good news contained in the Employment Situation Summary released by the Bureau of Labor Statistics last Friday.  The report shows a steady improvement in the employment situation in the US over a number of fronts.

highlights

Specifically:

–the US economy added a surprisingly strong 290,000 non-farm jobs during April.  Of these, 66,000 were temporary positions working on the national census, leaving 224,000 “real” jobs gained.

–February new-job figures were revised up by 53,000 (to 39,000 added, no census) and March numbers were revised up by 68,000 (to 230,000, 48,000 from the census).  This means the economy has created a robust 445,000 new jobs in the past three months (+114,000 census-related positions).

–True, the unemployment rate rose from 9.7% to 9.9% during the month.  Given that this is because workers who had given up hope are sensing the economic situation is better and are out looking for work again, this too is a positive.

–Job gains are starting to be led by manufacturing and services, not by health and education.  The latter groups are still rising, but the gains in employment are now being driven by the sectors that were hurt the most during the recession.

–Less-educated workers appear to be beginning to find work again.  From a purely economic point of view, this may not be such a key development, but for social and political stability it is.  In a country where growth s increasingly driven by knowledge workers, one would think that high school dropouts will tend to be chronically unemployed.

one exception–long-term unemployed

In fact, the one sour note in the report is the composition of the group classified as unemployed.  Of the 23.6 million Americans in this pool, the only category that is not shrinking is those out of work for the longest time (27 weeks or more).  That subgroup has risen from 6.1 million (40% of the total) last December to 6.7 million (46%) in April–a timeframe in which the overall unemployed group has shrunk by about eight hundred thousand.

conclusions

We’re not in a boom.  But the economy is in better shape than the consensus has been thinking.  And the upturn in hiring appears to have started in February-March, which is earlier than previous government reports had shown.  It’s also hard not to notice that the hiring pickup coincides neatly with the end of the January-February correction in the stock market and the subsequent steady march upward of the indices.  Assuming the emerging more favorable trend in employment continues–and I don’t see any reason to believe it won’t–we should expect it will support resumption of a gentle rise in stock market indices, once the correction we’re in plays itself out.