The news arrived just in the nick of time. Nonfarm payrolls surged by 290,000 last month (seasonally adjusted), the biggest rise in four years. This is good news—great news, in fact, as it suggests that the labor market is in fact recovering with substantial momentum. Given yesterday’s wave of market selling around the globe, the news comes at a crucial moment in the business cycle. Indeed, the outlook would indeed appear bleak if today’s employment numbers were low or (gasp!) negative.
Rest assured, the road ahead remains challenging. But the April employment report is a down payment on thinking that progress, if not yet inevitable, is a good deal more likely than it was yesterday. It’s clear that the trend in net job growth is quite real. Macro trends on this level don’t turn on a dime. That was working against us over the last two years; now it seems to be a net positive.
As our chart below shows, the economy is now creating jobs on a level that’s unmistakably robust. It’s taken longer than usual to reach this point, and there’s still some doubt if the trend is sustainable in terms of hefty monthly gains. But for the moment, the labor market turned a corner for the better and it would take a rather large negative shock to turn this ship off course.
A month ago, there was a clue that better times were coming for job growth. When the March employment report was released, we wrote that “Job Growth Worthy Of The Name Arrives…Finally.” In fact, today’s report revised upward the 162,000 rise in March nonfarm payrolls to 230,000. But we also wondered at the time if the March employment news was a quirk. We now have an answer.
Of course, there are always caveats and contingencies, and today’s update is no different. That starts by recognizing that the government is engaging in a fair amount of hiring these days, including the addition of 66,000 temporary Census workers last month. Yet even after ignoring the government, private sector payrolls still rose by a strong 231,000 in April. And the gains were broad based. Except for losses in transportation/warehousing and information industries, employment rose throughout the economy last month.
Tempering the good news, however, was a rise in the unemployment rate in April to 9.9% from the 9.7% rate that prevailed in each of the three previous months. “The unemployment rate is up as discouraged workers are returning to the job market to look for employment,” Stuart Hoffman, chief economist at PNC Financial Services Group, tells Bloomberg BusinessWeek.
More troubling is the tally of the long-term unemployed (jobless for 27 weeks or more): this measure continues to rise. There were 6.716 million long-term unemployed workers last month, up from 6.547 million the month before and 80% higher than a year earlier.
Therein lies the core of the main challenge that continues to hang over the economy: repairing the damage born of the massive job losses of the past two years. Job creation in the private sector is the ultimate answer. Today’s numbers are encouraging, more so than we’ve seen in any employment report since the Great Recession began. But let’s recognize that we need many more months of April’s good news to see significant progress on the broad economic front. What’s more, with the Greek debt crisis threatening to migrate across borders in Europe and around the world, the markets aren’t likely to tolerate any setback on the economic front.
Despite today’s good news, doubt lingers. “The economy is turning; unfortunately it is not improving as much as one would hope given the downturn,” Dan Greenhaus, chief economic strategist for Miller Tabak and Company, tells The New York Times today. “As companies come out of the downturn they are going to be somewhat reluctant to at least immediately increase their work force.”
The trend, at least, now appears to be our friend when it comes to net job creation. But even if job growth turns out to be sustainable and robust, there’s no quick cure for another problem weighing on economic recovery: debt. As we wrote last month, “It’s all about debt from here on out, and probably will be for many years.” For those who disagree, yesterday’s global selloff is a reminder that there are still some rather large and dangerous skeletons in the closet.
Ultimately, job growth is the only way out, in part because it both reflects and stimulates broad economic expansion. Ground zero in attacking the threats that bedevil the U.S. is the labor market, and today, at least, the army of growth won.