Take A Deep Breath: Good Jobs Report

Now that’s much better.

There is nothing in this morning’s report not to like, even the rise in unemployment from 9.7% to 9.9%.

Let me explain:

First let’s all remember that there are two different reports combined here. One is the result of a survey of employers – called the ‘establishment survey’, this is the source of our information about the rise or fall in the number of jobs. The second is the result of a survey of households, which is where the data to determine the unemployment rate comes from.

Because there are two sources of data it is not unusual for them to show what appears to be contradictory trends. Add in the usual disclaimers for statistical error and the chances of contradiction grow even more.

So what did we learn today?

From the establishment survey we learn that the economy added 290,000 jobs last month. That is a very good rate of addition. The total was inflated somewhat by the big surge in hiring for the census, but even if we take those jobs out the revised total – 224,000 – is the strongest we have seen for ages. Even better: practically all these jobs were in the private sector because the non-census level of government employment stayed flat. Couple this news for April with the news that the March figure was revised upward to a gain of 230,000, and that February’s loss was reduced to 14,000, and we see a very clear a decisive shift in the job market.

Businesses are hiring again.

The household survey appears to tell a different story: the unemployment rate grew nearly to 10%. But we should not be too concerned because the jump comes primarily from people re-entering the work force. This is a very good sign indicating that at the grass root level people are seeing more opportunity and are responding by looking for a job. Oddly this piece of information is the best news of all. It implies that the dark cloud hanging over the economy is lifting, and that regular folks, not just the analysts, are seeing the change. This change is probably why the recent uptick in consumer confidence is being maintained. It also helps explain why retail sales are picking up.

More to the point: buried in the data is the nugget that the percentage of the population with a job has increased once again – it has been growing since December – and is now at 58.8%. This tells us that the economy is adding jobs faster than the population is growing. This is another clear and welcome sign of improvement.

So.

We are not used to such good news, which is why I urge you all to take a deep breath.

Now for the big question: are we there yet?

Unfortunately, no.

Let’s put things in perspective. During the Clinton era the economy added jobs at about this rate for eight straight years. We saw nothing like it during the Bush years, and it will take many years of constant 200,000+ months to get the unemployment rate back down to ‘full’ employment which is usually calculated to be around an unemployment rate of 5%.

Still we have to start sometime and it looks very much as if we are firmly on our way.

Hurrah.