Friday, May 3, 2013

April Employment Report

The government released the April employment report this morning and the big news was upward revisions to job growth in February and March.  Employment in February rose more than any non-Census month since November 2005 (up 332,000) while March employment now is reported to have increased by 138,000 instead of 88,000.  Instead of last month's story about weakness in the job market, it now appears that employment continues to grow at a moderate pace (138,000 in March, 165,000 in April).  Those aren't great numbers, but in line with an economy growing modestly.  The other headline number is that the unemployment rate declined to 7.5%, down from 7.6% in March and the participation rate remained stable, so this was due to a real improvement in the job market (though the participation rate is still at a 34-year low).
What industries contributed most to the gains in employment?  Food and drinking places (restaurants) added about 38,000 in April, temp agencies added 31,000 and retail trade added 29,000.  Add it up and about 60% of the gains were in relatively low-paying industries.  The biggest concern in the report was a decline in the aggregate hours worked, which indicates that many of the jobs created were part time (i.e., fewer total hours worked but more employees means that each employee is working less time).  Two of the industries showing the largest gain in employment, retail trade and leisure/hospitality, are known to have a large proportion of part-time workers.  Using data on average weekly earnings and average hourly earnings (table B-3 of the release), the average worker in retail trade now works about 31.4 hours a week while the average in leisure and hospitality is about 26 hours (both of which declined between March and April).

Even though the economy is adding more jobs than previously estimated (which is definitely good news), the April job report raises questions about the quality of jobs, both in terms of an overabundance of jobs in relatively low-paying industries and a disproportionate number of part-time jobs.

What are the key takeaways?  The economy is adding more jobs than previously thought, but employment is still growing at a modest rate.  Also, the aggregate hours worked has not kept pace with employment growth.  So far this year, employment has increased at a 2.2% annualized rate while aggregate hours worked has risen by only 1.2%.