Concerns that the U.S. economy’s recovery is stumbling intensified Friday with the government’s second consecutive subpar monthly-jobs report.
Employers added an anemic 115,000 jobs in April, as a shrinking workforce shaved the unemployment rate to 8.1 percent, down slightly from 8.2 percent in March, the Labor Department said. Friday’s numbers were well below the 170,000 new jobs that mainstream economic forecasters had expected.
The disappointing jobs report helped drive stock prices down. The Dow Jones industrial average fell 168 points to close at 13,038. The Standard & Poor’s 500 dropped 22 points to 1,369. The tech-heavy Nasdaq average suffered its worst day of the year, sinking 68 points to 2,956.
Economists think that companies hiring early amid an unusually mild winter explains some of the bouncy numbers.
“The job market was soft in April, given the tepid payroll job gain and the decline in labor force participation. But it isn’t as soft as the data suggest, as it reflects payback from the very warm winter, which juiced up job gains earlier in the year,” said Mark Zandi, the chief economist for forecaster Moody’s Analytics. “Underlying job growth, abstracting from the temporary effects of the weather, is over 175,000 per month. This isn’t boom times, but it is solid enough to bring down unemployment further.”
Zandi thinks unemployment will be under 8 percent by Election Day, Nov. 6, and that hiring will perk up again later in the year.
Part of his optimism came from revisions Friday that showed that hiring in March was 154,000, not 120,000, and that February’s sizzling initial report of 240,000 jobs was actually 259,000. Viewed over a longer stretch, the hiring picture looks stronger than the single month of April.
The White House seized on this theme.
“With upward revisions of 65,000 (private-sector) jobs to the past two months’ employment reports, in the first quarter of 2012 private employment expanded by 697,000 jobs, the largest quarterly increase since the first quarter of 2006,” Alan Krueger, the head of the White House Council of Economic Advisers, said in a statement. “So far this year, 827,000 private-sector jobs have been added, on net.”
Government job losses – on the federal, state and local levels – drag against that number, however. Private-sector employers added 130,000 jobs in April, but the overall number was lower because of the 15,000 government jobs that were lost during the month.
“The employment deceleration in part results from warm winter weather that pulled some hiring forward, producing a payback now. For that reason we think that the March and April payroll figures understate the pace of recovery, and we look for a better but still subdued pace of job creation in the 150,000-200,000 region over the rest of the year,” Nigel Gault, the chief U.S. economist for forecaster Global Insight, said in a research note.
The jobless rate, which fell by a tenth of a percentage point, is declining in part because of workers exiting the labor market.
“The decline in unemployment also reflects the expiration of the emergency unemployment-insurance program in an increasing number of states. Older workers losing unemployment insurance are leaving the workforce, contributing to the decline in labor force participation, and younger workers that were slow to take a job now have no choice,” Zandi said. “I expect the job market to reaccelerate later this summer and fall.”
The White House’s chief economist, Krueger, said exiting workers weren’t the biggest reason for the falling jobless rate.
“Though labor force participation fell over the month according to the household survey, since August the unemployment rate has fallen by 1.0 percentage point, from 9.1 percent to 8.1 percent, and nearly three-quarters of that drop is attributable to increased employment,” he said.
Still, another 342,000 workers exited the labor force in April, and Republicans, gearing up for November elections, seized on that.
“Spinners looking to support the administration will point out that jobs were revised up for February and March, or that the seasonal adjustment is producing misleading results, or both. There’s not enough silver there to constitute a thread, much less a lining,” wrote Douglas Holtz-Eakin, the head of the GOP research center American Action Forum and a former director of the Congressional Budget Office.
Within the April numbers was a mix of good, bad and ugly.
On the plus side, the broad category of professional and business services – higher paying white-collar jobs – rose by 62,000. Manufacturers added 16,000 jobs, for 167,000 in the past five months. April’s gain was down from 41,000 new manufacturing jobs in March.
“Overall, these numbers reflect recent sluggishness in the economy. Manufacturing activity, while still expanding and positive for the rest of this year, has experienced a slowing in recent months. Part of this might be due to seasonal adjustments, with some businesses taking advantage of the warmer winter,” Chad Moutray, the chief economist for the National Association of Manufacturers, said in his blog Shopfloor.org. “Yet it is also a reflection of other anxieties that continue to permeate our thinking. Higher energy and raw material costs dampened sentiment for both businesses and consumers, and worries continue to persist about U.S. fiscal policy moving forward, and about Europe’s continuing struggles.”
Retailers added almost 30,000 jobs during the month, but this is a soft number since retail sales have been sluggish of late and hiring in the sector may not be durable.
“The April employment report is a bit of a head scratcher,” wrote John Silvia, the chief economist for Wells Fargo Securities in Charlotte, N.C. In a research note, Silvia and his team said sectors such as leisure and hospitality, which added a paltry 12,000 jobs, should be doing much better, but hiring by retailers, restaurants and bars was stronger than expected.
On the ugly side, the hard-hit construction sector lost another 2,000 jobs during a period when roadwork and building projects should be getting under way.
“It is possible that commercial and industrial construction will remain soft for a few more months,” Anirban Basu, the chief economist of the trade group Associated Builders and Contractors, warned in an analysis. Although jobs were lost, the sector’s unemployment rate was 14.5 percent in April, he said, better than the 17.8 percent in April 2011.
“For the second consecutive year, the nation’s economy has softened during the January-April period,” Basu said. “However, U.S. economic fundamentals are better now than they were a year ago, as there is no immediate debt-ceiling confrontation ahead” in Washington.