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Brookings on Job Numbers

Spring Swoon in the Job Market Recovery

Gary Burtless

The latest BLS employment report offers a mixed and mostly unpromising picture of the job market recovery. The closely watched payroll employment numbers provided two doses of bad news. Estimated payroll gains in May amounted to just 69,000, the slowest rate of improvement since May 2011, when employers added just 54,000 to their payrolls. At the same time the BLS revised downward its earlier estimates of payroll gains in March and April, erasing a total of 49,000 payroll jobs from previously estimated job gains in those two months.

To keep pace with the growth in the working-age population employers need to add between 90,000 and 100,000 jobs every month. If employment grows more slowly than that, the labor force participation rate must eventually fall or the unemployment rate will rise. The latest BLS estimates suggest that payroll employment gains have fallen short of this benchmark for the past two months.

As sometimes happens, the household survey offers a more promising picture of job market gains. The number of Americans who report they hold a job increased 422,000 in May, more than offsetting 200,000 in employment losses recorded in the March and April household surveys. Since January the household survey has shown employment gains averaging 162,000 a month, somewhat faster than the rate of improvement in the number of payroll jobs. The unemployment rate increased 0.1 percentage point in April, reaching 8.2%, because the number of adults in the labor force increased even faster than the number of employed. After falling in both March and April, the labor force participation rate increased 0.2 percentage points in May. The participation rate is now slightly higher than it was at the start of the year, and the unemployment rate is slightly lower.

The problem of long term unemployment remains acute. About 43% of the unemployed report they have been looking for work for at least 6 months. Although the percentage of unemployed in long-term spells is down slightly from the peaks attained in 2010 and 2011, it remains sharply higher than in any month of the post-war period up through the Great Recession. The long-term unemployed are much less likely to find work in a given month than the newly unemployed. In 2011 almost one-third of the unemployed in short unemployment spells managed to find jobs within a month; among workers unemployed more than six months, only 1 person in 10 managed to land a job in the next month. As extended unemployment benefits run out, many of the long-term unemployed face very bleak financial prospects.

The payroll survey data help us pinpoint sources of strength and weakness in the economy. Employment gains in health and private education continue to account for an out-size share of total job gains. Since December 2009 payroll increases in this sector have accounted for almost a quarter of all private-sector employment gains. In May they accounted for more than half. The manufacturing sector also continues to add to payrolls, boosting employment by 12,000 in May. Since December 2009 manufacturing has accounted for 12% of private sector job gains. The construction industry has shrunk since the start of the job market recovery, and it continued to shrink in the past four months. Construction employment fell 28,000 in May. Falling government payrolls have also contributed to the weak job market recovery. Since December 2009 public payrolls have fallen 510,000, offsetting about 1 out of every 8 new jobs added in the private sector. The short-term outlook for government employment is far from promising.

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