The headline payroll numbers fell short of consensus expectations in April, rising 115,000 overall and 130,000 for the private sector. However, the Labor Department once again made large upward revisions to prior months. Including these revisions, nonfarm payrolls were up 168,000 and private payrolls were up 196,000, both beating consensus expectations.
Some analysts ignore these revisions, but we think that’s a big mistake. Normal monthly revisions to the original payroll report have now been positive for ten straight months and have averaged about 40,000 per month during this period. As a result, without revisions, analysts have a systematically and downwardly biased impression about the job market.
#more#Meanwhile, some analysts may discount the drop in the unemployment rate to 8.1 percent, given that the drop was due to a decline in the labor force. However, in the past year, the unemployment rate has dropped 0.9 percentage points (from 9 percent in April 2011), while the labor force has grown 700,000. In other words, the trend of decline in the jobless rate in the past year is not due to fewer people looking for work.
Another piece of good news in today’s report is that the median duration of unemployment dropped to 19.4 weeks, the lowest level since 2009. Total hours worked increased 0.1 percent in April, and are up 2.1 percent from a year ago. Although cash wages were unchanged in April, they are up 1.8 percent in the past year. Combining hours and wages, total cash wages are up 4 percent from a year ago, which is still outpacing inflation.
The labor market is still far from where it was before the recession started. In the 20 years before this recession, the unemployment rate averaged 5.5 percent. With the right set of public policies, we see no reason why we can’t get there again. But the fact that we’re not there yet should not prevent us from recognizing the progress that we’re making.