Breaking Down April’s Unemployment Numbers; Up to 9.9%

The Bureau of Labor Statistics released their unemployment numbers today. The headline is that unemployment is up to 9.9% in April, from 9.7% percent, where it has been all year. But, the good news is that some 295,000 jobs were added to payrolls in April. There are a number of positive signs in this data, but also a number of problems. Here is a breakdown.

First, how did unemployment go up if we added jobs? Unemployment is measured by the people currently looking for jobs. And in April 805,000 more people began looking for work than in March. Some of those people founds jobs, others didn’t, so the net gain was around 295,000. Percentage wise, 255,000 more people looking for work didn’t have a job in April, thus the percentage is higher. It can be argued that this is a good sign, since it means more workers have confidence they can find a job.

Second, what could be bad about these numbers? There are 15.3 million people in America who are looking for a job. There are another 2.4 million people who want a job, but don’t think they can find one and so they didn’t look for a job in April or decided to go back to school. That 17.7 measure of unemployment is higher than March at 17.3 million unemployed. Part of that number is because of the surge of new job seekers, but half of the number is because of an 200,000 person increase in “discouraged workers”—people who just don’t think they can get a job. It is difficult to parse why 800,000 new people would be excited about getting jobs while another 200,000 people would believe the situation is hopeless. But the answer lies not at the macro level of national economic growth, but in local economies. Certain parts of the country are coming back, but others remain deeply in trouble.

Another problem was an increase in long-term unemployed in April. The number of people without a job for 27 weeks or more and who continue to look increased to 6.7 million.

Unemployment Stats
Apr. 2009 Feb. 2010 Mar. 2010 Apr. 2010 Monthly change Annual change
27 weeks and over 3,725,000 6,133,000 6,547,000 6,716,000 +169,000 +2,991,000

This long-term unemployment trend means intangible losses, like the loss of skill from being out of practice for a while, and the ripple effects of long-term lack of income.

Still another problem is that only 1.2 million people who got jobs last month were new workers, compared to 3.7 re-entrants. The number of new entrants in the job market has increased from April 2009 (919,000), but this will be something to watch in May and June with a new wave of college graduates gearing up to enter the job market.

Third, where were the job gains in the economy? Manufacturing, health care, and food services were biggest gaining sectors other than administrative work. Oh, and the federal government, which added another 65,000 workers. How does adding more difficult to fire public servants save money to cut down on the deficit?

Here is what to look for going forward. Unemployment numbers are worse today, a year into the stimulus, than they were at this point last year. The stimulus, though, has staved off some likely worse job numbers. However, because that government money is running out, incentives to hire workers going away will mean those even worse job numbers we prevented will have to filter into the system later. As it stands now, there is no real recovery in the system that is driving sustainable, vibrant growth. With a trickle of new workers getting jobs, but no serious dent in unemployment, we are continue to stare down the prospects of an American lost decade.

Update 5/7:

I’ve neglected a stat that I’ve gotten questions about. So, you’ve heard about the “broader unemployment rate” that is typically higher… what is that and where does it stand now? Well, counting for “U-3” unemployed people and “U-6” under employed people—i.e. those people working part-time jobs but who want full time work or those who have given up looking for work—there are 17.1% unemployed, much greater than the 9.9% standard number. This is the unemployment rate that is felt most strongly in the hearts of Americans. It also increased 0.2% in April, up from 16.9% in March. And it is getting closer to the high mark of U-6 unemployment in this recession at 17.4% in October 2009. For more on U-6 unemployment measures, see here.