After dismal economic news this past week, the Labor Department announced today 288,000 jobs were created in the month of April bringing the unemployment rate to its lowest level since 2008.
Previously the unemployment rate was 6.7% and it dropped to 6.3% making it the biggest one-month drop in over 31 years.
Marketwatch.com reported the increase in hiring was widespread, with almost every major industry adding jobs. Professional jobs surged by 75,000, about one-third of them temporary positions. Retailers added 35,000 jobs, bars and restaurants beefed up staff by 33,000 and the construction industry hired 32,000 workers.
U.S. manufacturers generated 12,000 jobs, but that was a bit of a disappointment amid of range of data showing that business is picking up. Government also added 15,000 jobs.
Many economists had expected a faster pace of job creation as the country was just coming out of the harsh winter which had paralyzed the majority of the country.
In the Labor Department report, the size of the labor force shrank considerably as 806,000 people dropped out the labor force. The labor participation rate is now hovering around 62.8% down from 66% in September 2008.
CBS news has reported that despite the unemployment rate plummeting, more than 92 million Americans remain out of the labor force.
The question that which many economists are asking is this a onetime anomaly or is the economy beginning to gain traction. Will this momentum carry over into the succeeding months as the severe winter fades and we begin to head into the summer months?
Michael Griffin, executive director at the business consultancy CEB, said barely more than one-third of company executives surveyed by his firm said they plan to hire more workers in the next 12 months. He said companies are “hesitant” about whether economic growth is really accelerating or if the latest upturn is just another false start.
Jason Furman, Chairman of the Council of Economic Advisers for the president, “Employment growth was solid in April, as businesses added jobs for the 50th consecutive month, and the unemployment rate fell.”
Republican House Speaker Rep. John Boehner issued a press release on April’s unemployment report, “Earlier this week, we learned that economic growth largely stalled at the start of the year. And while it’s welcome news that more of our friends and neighbors found work in the past month, this report also indicates more than 800,000 Americans left the workforce last month, which is troubling.”
Each side will spin April’s unemployment report to fit their political narrative, but there are some serious questions which need to be asked.
With the unemployment rate now down to 6.3% will the Federal Reserve accelerate its fiscal stimulus reduction in its bond buying program or will it continue its tempered approach?
Will the president continue his fiscal economic policies in light of the sharp reduction in the unemployment rate? What polices will he enact regarding the 800,000 who left the work force because they were unable to find viable employment? How will his policies change the direction of the reduced labor participation rate, which is now lower then anytime since 1978?
We will know in a few months if the sharp drop in the unemployment rate is a true barometer of the strength of the economy or will it fizzle over the summer.
Every spring the economy begins to show life then reverse’s its upward trajectory in the summer.
We will have to see.
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