We’re all dying for some good news—any news—so fewer job losses in April seems like reason to celebrate. Instead of shedding more than 600,000 jobs, as in previous months, the economy only lost 539,000 jobs last month. Pop the champagne.
But sip it sparingly. The job numbers still amount to bad news, even if they suggest that things are getting bad at a slower pace. The unemployment rate rose by four percentage points, to 8.9 percent, the worst since 1983. That complicates things.
For instance, Pat O’Hare of Briefing.com points out that President Obama’s 2009 budget—the one that anticipates a $1.7 trillion deficit—assumed an unemployment rate for all of 2009 of just 8.1 percent. “That looks like a very long stretch at this time,” writes O’Hare, “as the rate is likely to move higher the next few months.” In fact, most economists think the unemployment rate will continue to rise throughout 2009, not peaking or leveling off until 2010.
Higher unemployment would make one of the key assumptions underlying Obama’s budget way off, implying a much bigger defecit than forecast. And that in turn will make it harder for Obama to pursue favored projects like education and healthcare reform and green energy.
[See the best and worst bailed-out banks.]
At 8.9 percent, the unemployment rate has also eclipsed both the “baseline” and the “adverse” numbers that the Federal Reserve used when conducting its stress tests on the nation’s 19 biggest banks, to determine their ability to weather the recession. The Fed’s numbers are annual averages, not monthly or peak figures, but if the unemployment rate continues to rise above 8.9 percent throughout 2009, as expected, the annual average will end up well above both of the Fed’s estimates. The stress tests have made a favorable impact on the markets, but they’ll start to look hollow if unemployment ends up significantly higher than levels the Fed used to conduct its analysis. That could undermine Obama's overall financial recovery program, just as it seems to be getting traction.
Finally, if you read the fine print, the job numbers improved largely because of government hiring, which added 72,000 jobs in April. A big boost came from hiring workers needed to help carry out the 2010 census. Those are real jobs, but they don’t reflect anything about the health of the private-sector economy, which remains moribund.
Since the recession started in December 2007, the economy has lost 6.2 million jobs. Odds are we’ll keep adding to that tally—not subtracting from it—throughout the year. Optimism is great, but until that number stops going up and starts going down, the job news is going to be lousy. No matter how hard we look for a silver lining.