Even with all the political slicing and dicing that accompany these big reports, the April employment survey was a lot stronger than virtually anyone expected. Nonfarm payrolls surged by 288,000. Private payrolls gained 273,000. The unemployment rate registered a big decline, dropping from 6.7 percent to 6.3 percent.
Some are arguing that lower unemployment is a function of 806,000 dropouts from the labor force. But that's a reach. In the prior three months, the small-business-related household survey gained over 1.2 million jobs. So these month-to-month bumps have no meaning. But the trend is clear: The unemployment rate is falling and more jobs are being created.
Putting aside liberal versus conservative debate, more jobs and less unemployment are good for America.
Texas congressman Kevin Brady, the chairman of the Joint Economic Committee and a vocal critic of Obamanomics, made this acknowledgement: "Finally we have a jobs report that is better than merely middling."
But in a broader sense, the big April number merely offsets bad winter weather and gets nonfarm payrolls back to their long-term trend. Over the past three years, monthly payrolls have averaged 187,000. With the April report, the establishment survey's trend has moved back to 197,000 a month.
If this were a truly strong and durable recovery, we'd be seeing monthly job gains closer to 300,000. Economist Scott Grannis writes that the April report "doesn't alter the big picture: Private sector jobs have been growing by about 2 percent a year for the past several years. That's enough to give us 2 to 3 percent overall growth but not much more."
Looking under the hood, important glitches continue to plague the employment situation. Wages were flat in April and average hourly earnings have increased only 1.9 percent over the past year. Aggregate hours worked gained only 2.4 percent. Putting the two together, you get a modest 4.3 percent increase for nominal GDP (5 or 6 percent would be better).
And there are still far too many people not working. The labor force participation rate actually fell from 63.2 percent to 62.8 percent for April. It's the same bad sign that has plagued the duration of this recovery.
Similarly, the employment-to-population ratio held steady at a low 58.9 percent. That ratio peaked at 63.4 percent in 2007 during the last cyclical recovery. At the 2000 cyclical peak, the employment ratio was 64.6 percent.
Today, at 11:20 AM PT: Get the Market Movements in Advance; Williams Edge Webinar for July 25th, 2014 | John Ransom
Today, at 11:20 AM PT: Get the Market Movements in Advance; Williams Edge Webinar for July 24th, 2014 | John Ransom