By: Russell Swansen, Chief Investment Officer April 05, 2016
In an unusual twist, the unemployment rate increased from 4.9 percent to 5.0 percent last month even though the economy added more than 200,000 jobs during the same period, according to the April employment report from the U.S. Department of Labor.
How can the number of newly employed go up at the same time as the unemployment rate? The new numbers indicate that more people are entering the work force, which is a strong sign for the economy.
According to the April report, non-farm payrolls were up 215,000 in March following a gain of 245,000 in February. A separate survey, similar to the “nonfarm payroll” report but with a wider definition, put the number of newly employed workers in March at 246,000.1
But the number of new jobs in both surveys fell short of the number of new individuals now looking for work. The labor force grew by 396,000, according to the report, which was considerably higher than the number of new jobs filled (below 250,000 in both surveys).
The estimated number of new jobs for the first quarter of 2016 was 628,000, which is slightly above the quarterly average of about 610,000 per quarter since the job market began to recover in 2011.
What is the significance for the economy?
An increase in the number of employed individuals continues to bode well for the economy because it shows that employers are still expanding their businesses.
Here are some other factors worth noting:
- Labor participation rate. According to the report, the labor participation rate of individuals in their prime earning years (25-54) has been rising in recent months after dropping to a record low in September 2015.
- Close to Fed “full employment” rate. Janet Yellen, Federal Reserve Chair, recently said the Fed considers “full employment” to be 4.8 percent. That means the 5 percent estimate reported in the April employment report puts the U.S. very near the “full employment” target.
- Leading indicators solid. We believe that these leading labor market indicators suggest that the economy is not currently headed for recession. Specifically:
Initial unemployment claims have declined to an extraordinarily low level in recent months – particularly when factoring in population growth. While a change in direction would be more significant than the new claims level itself, recent Labor Department figures indicate that initial unemployment claims are continuing to trend downward.
The average work week has been stable since the previous month’s employment report.
There are still a couple of areas within the labor market that we believe have room for improvement. For instance, the number of individuals working part time who would prefer to work full time has been improving, but still has a long way to go, in our opinion.
The number of long-term unemployed also remains at an elevated level.
But we continue to be encouraged by the steady expansion in new jobs, which is one indication that the economy remains on reasonably solid footing.
Well that's unexpected - your subscription request was not submitted. Please try again.
Gain From Our Perspective
Get Our Investing Insights Newsletter in Your Inbox.SUBSCRIBE NOW
Gain From Our Perspective
Get Our Investing Insights Newsletter in Your Inbox.
Thanks for Signing Up!
Be sure to check your inbox for the Investing Insights newsletter to get the latest news and insights from Thrivent Mutual Funds.
Great news - you're on the list!
Looks like you're already on our mailing list. Be sure to check your inbox for the Investing Insights newsletter to get the latest news and insights from Thrivent Mutual Funds.