Unemployment rate drops, job creation stagnates

(MoneyWatch) The U.S. economy added 115,000 new jobs in April and the unemployment rate fell to 8.1 percent, the lowest level since January 2009. While some may focus on the rate, the more important fact is that job creation was disappointing.

2012 started off with a bang in terms of job creation. In January, the economy added 275,000 jobs; February was revised up to 259,000 from the originally reported 240,000; and March was also revised up to 154,000 from 120,000. With today's data, the average monthly job creation this year has been 200,000. The big question that looms: Were the January-February results an anomaly and are the March-April results indicative of where the economy and the jobs market really stands?

Hiring slows sharply with just 115K jobs added

In the weeks leading up to the report, there seemed to be impending doom. Weekly claims were trending higher (claims averaged about 384,000 in April, up from an average of 369,000 in January, February and March); the ADP private sector employment report was weaker than expected; and then there was everyone's favorite scapegoat: The weather. Economists said there would be payback for that mild winter that much of the nation enjoyed.

Analysts said that employers hired more than expected in December, January and February, "borrowing" those jobs from March, April and May. Goldman Sachs analysts guessed "that weather has boosted the level of payrolls by around 100,000 as of February, and may have shaved about 20,000 from the March report. Going forward, we currently expect payback of about 50,000 in April and the remaining 30,000 in May."

There was also a lot of chatter about the unemployment rate potentially dropping, but for the wrong reason - because discouraged workers are leaving the labor force. The financial crisis and Great Recession brought many new terms to our vocabularies, including "credit default swaps", "mortgage-backed securities" and "participation rate". Participation rate is the percentage of the working age population in the labor force and over the last 20 years, it has held at 66 to 67 percent. In April, the rate was 63.6 from 63.8 percent in March, which meant that 169,000 fewer people were in the labor force. Some of that drop is attributable to demographics-aging boomers are calling it quits. But a good chunk can be chalked up to frustrated would-be workers giving up their job searches for a while and opting out of the labor force.

To be counted as unemployed, you have to have been looking for a job within the last four weeks. As conditions improve, more people jump back into the labor force. They are joined by those whose long term unemployment benefits run out, which pushes up the participation rate and by extension, the unemployment rate. The economy needs at least as many new jobs as new people entering the labor force, just to keep the unemployment level even, which is why at the current rate of job creation, it will take approximately 4 years to return to the pre-recession level of unemployment of 5 percent.

We are now entering our fifth year of pain. December 2007 marked the beginning of the Great Recession, which lasted 18 months until June 2009. The meandering recovery has entered its 35th month and while there has been great improvement in some areas (the stock market has more than doubled), the progress on jobs (and housing for that matter) continues to be frustratingly slow. The economy has added 3.75 million jobs since employment bottomed in February 2010, but there are over 5 million fewer total nonfarm jobs now than when the recession started in 2007.

-- Jobs created: +115,000 (March: 154,000; Feb: 259,000; Jan: 275,000)

-- Private sector jobs created: +130,000 (from +121,000)

-- Government: -15,000 (from -1,000)

-- Unemployment rate: 8.1 percent (from 8.2 percent - the lowest rate since January 2009)

-- Under-employment rate (marginally-attached, part-time): 14.5 percent (unchanged -- in 2007, the rate was 8 percent)

-- Total number of unemployed: 12.5 million (from 12.7 million)

-- Long-term unemployed (jobless for 27 weeks and over): 5.1 million representing 41.3 percent of the total unemployed (Over the year, the number of long-term unemployed dropped 759,000)

-- Average duration of unemployment: weeks (from 39.4 weeks)

-- Average workweek: 34.5 (unchanged)

-- Average hourly earnings: up $0.01 to (up 1.8 percent over past 12 months)

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[SUZAMBA]

All the shoulda, coulda, woulda's won't change what is, were a country with high unemployment! You can't change the past, you try in the present and pray for the future!

[jayz1943]

CBS is wrong again. Barack Obama said 130,000 jobs were added in April. Why is this network putting out conflicting figures?! Obama also said, "The unemployment rate ticked down" to 8.1%. It is a "good news" trend." Well?! Employment is down. Isn't that a good thing?! Let us celebrate the good news!

[SUZAMBA]

Unemployment is down because so many lost their unemployment. And how do you track those people? We have so many people unemployed it's pathetic. Do your research!

[smittyc]

Hey folks, don't get upset. The people who are unemployed know what is going on. It is the age old expression, figures don't lie, but liars figure. Let them post all their "facts", November will tell the tale.

[KansasCity-2012]

by Mortar1SG_29 May 4, 2012 6:15 PM EDT
KC, you are ignoring the facts. Please look at all of the numbers...then compare.

Obama's economy is NOTHING like Reagan's!

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I do agree with you on your point - Reagan had 8 years and Obama is just halfway there. In four more years, you'll see Obama repeat the feat Reagan did 30 years ago.

[Ourdoc1]

Blame the RepukliCONS for the slowing. They are doing everything in their power to stop the job growth to try to hurt Obama, they could care less about America or its people.

[vsmit]

Or the lack of any economic recovery plan by Obama isn't working. Gee, who is president, right, Obama.

[KansasCity-2012]

Unemployment is coming down. As for the discounting of long term unemployed considered to have given up, it was a statistical adjustment practice that was created in the Ronald Reagan era 30 years ago.

If it worked for Reagan, it will work for Obama, too.

No one can slam Obama. He isn't failing the country in any capacity.

Many are anxious, but rightfully so. Because the 2007 mortgage meltdown crisis, many of us postponed retirement and lost 401k value, and home equity. Some lost our homes altogether. None of that was Obama's fault. The riders started falling off their horses in the Bush administration era.

[cbs4111]

CBS - You're doing America a great disservice by not running feature stories that explain how bad unemployment really is. We have to read from the commenters what the true numbers are. We have to read from them why the unemployment rate really dropped - people are so discouraged they've stopped looking for work. We have to read from commenters that there are 4 million fewer people working in the US now then when Obama the Liar took over.

Shame on you. A pox on your house.

[SaveRMiddle]

What's up with CBS reporting? How about some transparency? (labeled here as "chatter").

The Labor Dept had to shift 342,000 jobless to their Out of Labor Force category to get this rate to 8.1.

[Dave_P6]

Something to keep in perspective even though the job numbers for April aren't as high as we'd like.

I think what a lot of people don't realize is that job growth for last 25 consecutive months looks about the same as the best periods of job growth during the Bush years, and even some of the Clinton years. The best Bush years were more choppy than the best of Obama's, and Bush wasn't coming back from one of the worst economic collapses since the Great Depression. Don't believe me? Look it up.

Even though the number of jobs added in April is less than we'd hoped (we did add 115,000 jobs), the sky isn't falling folks. Hiring goes up and down even in the best of times. Unemployment is still high but it's because we lost so many jobs from the recession of 2008/2009 and we're climbing out of a hole. The number of jobs we've been adding each month for the last 2 years isn't that bad, so it's going to take time to bring down unemployment. Having said that, it's dropped 2% in 2 years.

So hang in there everyone, it's going to be ok.

[involved_indi]

It hasn't really dropped at all. People are running through their benefits and then falling out of sight. The mere fact that we added only 125,000 jobs last month and the stats say that unemployment dropped indicates that. Economists have been saying for the last several years that the economy needs to add 250,000 jobs per month to merely stop unemployment from rising. The fact that it was 125,000 and the number dropped indicates a horrible economy where unemployment has been so bad and so long term people are out of benefits. Thanks President Obama.

[Dave_P6]

No it isn't. If you look at the whole picture you'll see MASSIVE job loss that started on Bush's watch and a recovery that started on Obama's watch. Which has resulted in job growth over the last 25 months that's at the same level as the best periods of job growth during the Bush years, and even some of the Clinton years.