April's Jobs Report Surpasses Expectations, Despite Higher Jobless Rate

The economy added 244,000 jobs last month, more than expected.

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Net job change chart for July 2011

The economy delivered a pleasant spring surprise in the Labor Department's most recent jobs report, adding 244,000 jobs in April, more than economists expected, and a third straight month of job gains above 200,000. Even better, private-sector gains, which came in at 268,000 jobs, were across the board, affecting a variety of industries.

"The [private-sector] strength is really everywhere with one exception, and that's construction," says Tig Gilliam, CEO of Adecco Group North America, a global recruitment firm. "It makes it clearer and clearer from an economic perspective that the housing market is the drag we have to deal with right now."

While the unemployment rate edged up to 9 percent, compared with March's 8.8 percent, most economists agree that's not necessarily a bad sign. A small uptick in the jobless rate, they say, hints that discouraged workers, those who had given up on looking for work, are now gaining confidence in the market and returning to their job search. That means the unemployment rate could continue to rise before (hopefully) dropping to pre-recession levels. "Ironically, it's a good sign—not a bad sign—that people are now willing to devote their effort to finding a job," Gilliam says.

In April, job seekers landed positions in retail, a sector that added 57,000 jobs, as well as professional and business services, which saw an increase of 51,000 jobs. Healthcare, an industry that has seen consistent gains, added 37,000 jobs. And the leisure and hospitality sector saw a gain of 46,000 jobs, bringing its three-month total to 151,000.

While the private sector fared well, state and local governments saw losses of 22,000 jobs in April, continuing a downward trend. Those losses weren't quite as significant when excluding education jobs, positions that are faring better than others within government.

Revisions to the previous two months' reports were also positive. March's job gains were revised to 221,000 from 216,000, and February came in at 235,000 compared with the originally reported 194,000. The overall number of unemployed remained at 13.7 million.

"We're really enthused that all four months this year have been as strong as they are," says Evan Davis, chief operating officer of MRINetwork, an executive search firm. "Over 200,000 jobs being created on average [each month]."

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In addition to beating economists' expectations of 185,000 jobs, the report was surprising in part because of several disappointing indicators released earlier in the week. First-time claims for unemployment benefits jumped to 474,000 for the week ending April 30, rather than dropping as economists had expected. And the monthly report from payroll processing firm ADP, which considers jobs only in the private sector (as opposed to the Labor Department, which counts both private- and public-sector jobs), also fell short of expectations, coming in at 179,000 jobs.

"[Those reports] point to some deceleration of the economy," says Mark Vitner, a senior economist at Wells Fargo, a financial-services company. "In that regard, [today's jobs report] seems to be the outlier ... But that doesn't diminish the good news," he says. "When you have a strong gain that's this broad-based, that tells me that there's staying power, that the risk of a slow-down would be less than the market thought previously."

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Other economists expressed caution. "Is the labor market really this strong?" Kathy Bostjancic, The Conference Board's director for macroeconomic analysis, asked in an email. Even with these gains, the market "is likely to turn a little choppy over the next few months," she wrote.

Despite recent job growth, the economy has a long way to go. We'd need to gain about 350,000 to 400,000 jobs a month for the next three years to return to our pre-recession unemployment rate of 5 or 6 percent, economists say.

agrant@usnews.com