Tea Leaf: U.S. job situation looks better still

Published: Tuesday, May 10 2011 4:00 p.m. MDT

American employment continued to rebound in April, with the strongest private-sector rise in more than five years. While overall job gains are still tepid versus average gains in prior U.S. economic recoveries, the stronger data of recent months are most welcome.

The U.S. economy added an estimated 244,000 net new jobs in April, more than the 185,000 consensus view of forecasting economists. Casting a pall over the stronger-than-expected employment rise was the jump in the nation's unemployment rate from 8.8 percent in March to 9 percent in April. More on that will follow.

The private sector

The 244,000 net rise was a combination of an estimated 268,000 net new jobs in the private sector and the loss of another 24,000 net jobs in the government sector. The solid private sector rise of 268,000 jobs was the largest monthly increase since early 2006.

The private sector has added 760,000 net new jobs during the past three months, with 2.1 million net new jobs since February 2010. Unfortunately, this number still pales against the painful loss of roughly 8.7 million jobs during 2008 and 2009 collectively.

New job additions have been widespread during the past six months, with an estimated 73 percent of industries adding new workers. Such is the most broad-based employment gain in 13 years, according to cnn.money.com.

Of continuing concern was additional weakness in the government employment sector, particularly in state and local governments. Overall government employment fell by 24,000 jobs during April, with 15,000 jobs lost in local governments. One of three jobs lost at the local level was in the education sector.

Severe budget pressures have led employment levels modestly lower, with additional job cuts likely. The government sector will be a drag on overall U.S. employment for the next year or more.

Explain down … explain up

As noted, the nation's unemployment rate rose to 9 percent in April from 8.8 percent in March. The 1 percent decline from November 2010 to March 2011 was the largest four-month decline in 27 years.

Just as economists tried to explain the sharp decline of the 11/10 - 3/11 period in light of essentially modest job gains, crystal ball gazers (economists) have tried in recent days to explain a rising unemployment rate in April despite more impressive job gains.

The answer is again found in widely different stories from the two primary employment surveys. The larger "establishment" survey noted the aforementioned rise of 244,000 net new jobs. The smaller and more volatile "household" survey (the source of the unemployment rate), which had indicated much stronger job gains in prior months than the larger survey, reported this time around that employment actually declined by 190,000 positions.

I don't make this stuff up.

Over time, the two surveys "agree" with each other. At times of transition from meager job gains (or losses) to stronger job gains, or from strong gains to meager gains (or losses), the two surveys act like men and women: One is from Mars, the other is from Venus.

Yes, a very bad analogy.

What is perhaps the most desirable approach is to rub a few months of household data together, and to take a longer-term look. Even with the rise in April, we have seen the nation's unemployment rate fall from 9.8 percent last November to 9 percent in April, a solid decline that is, again, most welcome.

Jobs by sector

Goods-producing employment rose by 44,000 jobs in April. Manufacturing employment rose by 29,000 positions, with manufacturing now adding 250,000 net new jobs since December 2009. Construction added 5,000 jobs, while mining and logging employment rose by 10,000 jobs.

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