Why April's Unemployment Rise Shows Workers Hopeful Again

More hopeful workers flood the job market in anticipation of finding work.

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On the day following the U.S. stock market's nearly 1,000 point intraday plunge, the Labor Department reported that employers added 290,000 jobs in April, the biggest monthly gain since March 2006. While it remains to be seen what effect it will have on investors who are focused on the sovereign-debt crisis in Europe, this is good news for recession-weary job seekers. The unemployment rate jumped to 9.9 percent last month, from 9.7 percent in March, as hopeful workers flooded back into the job market to search for jobs.

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Economists expected that the economy would add 180,000 jobs in April and the unemployment rate would remain at 9.7 percent. The higher unemployment rate may suggest that workers jumped back into the labor market faster than economists were expecting. It turns out that March hiring was much better than originally reported. The 162,000 payroll increase initially reported for March was revised upward to 230,000. February's 14,000 job losses were also revised to a job gain of 39,000. Employers have added 573,000 jobs since December, and private-sector employers have been responsible for 483,000 of those.

The number of unemployed jumped from 15 million to 15.3 million as people who had left the labor force returned—a common response to improving job market conditions. When workers are discouraged by a lack of available jobs, they may quit their job search and drop out of the unemployment count, but they're often then drawn back to their searches when they think hiring is picking up.

Who's hiring? Jobs were added across the board. Officials reported "sizable employment gains" in manufacturing, business services, health care, and leisure and hospitality. Manufacturing may have shown the most promising job creation, with payrolls up by 44,000 last month. The manufacturing sector began adding a smaller number of jobs in January, the first rise since January 2007. Construction employment also continued to edge up, likely helped along by better weather. Economists David Greenlaw and Ted Wieseman of Morgan Stanley Research noted that the number of workers "not at work due to bad weather" in April was "one of the lowest readings in history for that particular month."

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The federal government added to its payrolls last month as it undertakes Census 2010. While some economists had expected that temporary census hiring would contribute 100,000 jobs or more, it contributed 66,000, suggesting overall job gains in April were more permanent than expected. Looking at the April jobs report without the Census jobs and the government's tricky birth-death adjustment, Joshua Shapiro, chief U.S. economist at MFR, still sees a report that is "much better than most had anticipated." The job gains were surprising, Shapiro notes, because they were much stronger than other job market data (such as jobless claims, and the ADP report) would have suggested.

Is there any bad news? The number of individuals out of work for six months or longer continued to rise in April, now reaching a record high 6.7 million. These "longterm unemployed" are a particular concern to the economy, given the lack of skill development during unemployment. Roughly 46 percent of the unemployed last month were counted as "longterm," which suggests that some workers lack the skills employers are hiring for. Christina Owens, executive director of the National Employment Law Project, described the jobs report as "a tale of two cities—even as jobs return for some, the picture is growing more grim for many who remain unemployed." The number of people who are working part-time jobs but want full-time ones also hasn't budged much.

Some economists pay close attention to the under-employment rate, which measures the unemployed, as well as part-time workers who want full-time jobs, and workers who had looked for work in the past year but not in the last four weeks. That rate rose to 17.1 percent in April, its highest level since December.