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Job Growth: After a Warm Winter, a Cool Spring

Students take breaks at a job fair

Payroll employment increased a modest 115,000 in April, about half the pace of job growth in the previous three months. The change in employment recorded in the BLS household survey offer an even bleaker picture. The number of employed adults dropped an estimated 169,000 in April after falling 31,000 in March. The employment-population ratio has fallen 0.2 percentage points in the past two months, erasing some of the improvement we saw in the fall and early winter. In the seven months through February, respondents in the household survey reported monthly employment gains averaging 340,000. In the past two months, reported employment losses have averaged 100,000 a month. The unemployment rate declined a total of 0.2 percentage points in those two months, falling to 8.1% in April, because the labor force shrank even faster than the number of Americans who report being employed.

The latest BLS report contained some good news. Upward revisions in estimated payrolls in February and March added a total of 53,000 to previously estimated payroll gains in February and March. This means the preliminary estimate of payroll job growth in April follows job gains this past winter that were faster than initially estimated. The April payroll jobs report also showed a turnaround in employment gains in the temporary help industry. Payroll employment in this industry had increased for 8 successive months before shrinking in March. In a reversal, the number of jobs in the temporary help industry climbed 21,000 in April, suggesting that more employers need to supplement their own payrolls to fill their customers’ demand for goods and services. Manufacturing employment also increased in April, though at a somewhat slower pace than the rate we have seen since early last fall. Payroll employment in retailing also improved in April after two successive months of job loss.

Government employment continues to be a source of weakness. Since private payroll employment began to recover in winter 2010, government employment has slumped more than a half million, offsetting about one-eighth of the job gains in the private sector. The weakness in public employment continued in April. Payroll employment fell 15,000 in April after shrinking 12,000 in March. Surprisingly, drops in federal employment accounted for a quarter of the public-sector job losses in March and April. The lion’s share of employment loss was in local payrolls for education. Since January 2011 school payrolls of local governments have fallen about 117,000, or 1½%.

State and local government revenues have improved in recent months, so the weakness of public employment should eventually come to an end. It is remarkable, however, how much government employment has declined during the recovery. Private payroll employment stopped shrinking in February 2010 and has grown in every month since. Over the same period government payrolls have shrunk 502,000, or 2.2%. This experience contrasts with that in the Reagan Administration, when the nation also suffered a severe recession. After the 1981-82 downturn, government payroll employment increased 426,000, or 2.3%, in the first 26 months of the recovery. The severity of the current recession was worse than the one in the early 1980s, and the private-sector recovery has been weaker. Astonishingly, the public-sector employment response has exacerbated our current job market woes. Shrinking government payrolls are creating a persistent headwind that is slowing the labor market recovery.

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