On Friday May 6th, the Bureau of Labor Statistics released its April 2011 Employment Situation report. According to the BLS, the economy added 244,000 jobs last month, bettering economists’ estimates of an increase of 185,000 positions. Private industry gained 268,000 jobs; as has been the case recently while states and municipalities seek to balance their budgets, governments shed 24,000.
Strength came from a variety of sectors–manufacturing, retail, healthcare and leisure and hospitality.
The official unemployment numbers come from the larger of two surveys the BLS conducts monthly. Called “Establishment” data, it is compiled from reports from organizations representing about a third of the employees in the US. Not all the information comes in on time, so the Establishment data are revised twice before being declared final, once in each of the two months following the initial release. These revisions are themselves a good indicator of the strength of the economy, since they are typically positive in a healthy labor market and negative in a bad one.
The February job additions were initially reported as a gain of 192,000 positions. That number was revised up to 194,000 in March and 235,000 in April. The March job gains were initially reported as +216,000. In the April report, the figure was upped by 5,000 to 221,000. We’ve seen the same positive pattern for a while. So far, so good.
the unemployment rate
The April unemployment rate was determined to be 9% of the workforce, up from 8.8% in March. One might think that this is evidence of a well-known quirk in unemployment statistics that makes itself evident when the job situation is improving. It’s what the statistics do with “discouraged” workers, that is, unemployed people who are so downcast from repeated failure to find a job that they see no point in continuing to seek work and simply stop looking.
People in this situation are not considered to be unemployed. They’re classified as not being in the workforce. As a result, when the discouraged drop out of the ranks of job seekers, they decrease the workforce and thereby make the unemployment rate lower. In other words, in bad times the unemployment situation is actually worse than the official statistics show.
Conversely, as the job situation improves, the discouraged take heart and begin looking for work again. This makes the unemployment rate go up.
Although this is what usually happens, the April figures don’t show discouraged workers reentering the workforce. Instead, it shows 190,000 fewer workers employed than in March and 205,000 more unemployed in a workforce that’s virtually unchanged in size.
“Household” data and sample size
The unemployment rate isn’t derived from the Establishment data, which are forms companies send in telling about how many people they employ. The unemployment rate comes from the “Household” data, information gathered from monthly interviews with 60,000 randomly selected households.
This is a much smaller sample size. In fact, the BLS statisticians calculate that the smallest movement in the month-to-month figures from the Establishment survey that’s statistically meaningful (and not just statistical noise) is 100,000. For the Household survey, the number is 400,000. This means that the .2% increase in the unemployment rate may simply be a random variation in the data collected.
April is the latest in a series of months of strong employment gains for the US economy. There’s no evidence in the report (compiled around mid-April) of any slowdown in hiring activity due to rising commodity prices. But even though the data show a significant strengthening of the labor market to well over double the rate needed to absorb new entrants to the workforce, it will still take several years at this higher level of job gains for the economy to reach full employment again.