Today’s Labor Department employment report that job growth accelerated in April –- adding 290,000 jobs, the fastest monthly gain in four years -– is a welcome sign that the labor market is finally starting to build some positive momentum. The fact that 10 of the 12 major private sectors of the economy expanded employment in April, up from nine in March and six in February, indicates that employers are becoming confident enough in the emerging recovery to start hiring workers. Additionally, today’s report included positive revisions that increased employment gains by 121,000 in February and March.
Up for a fourth consecutive month, manufacturing employment increased by 44,000 to 11.6 million in April, bringing the 2010 gains to 101,000, the biggest four-month gain in a dozen years. The manufacturing employment gain was diffuse, with 19 of the 21 major industries adding jobs. However, half of the increase was in just three industries: food products, machinery and fabricated metals. The latter two were also responsible for the bulk of the 19,000 jobs added in March. Going forward, continued gains in manufacturing will not likely take hold until robust upswings in housing and business equipment join the strong export recovery that is already under way (and is likely one of the main drivers of the positive swing in manufacturing employment).
While the April rise in employment was impressive, the fact that the unemployment rate increased to 9.9 percent will likely weigh on consumer confidence in the near term. Unfortunately, this dichotomy of a simultaneous increase in both employment and the unemployment rate will likely continue in the months ahead. Those who were previously out of the workforce and re-entered as unemployed rose by 195,000 in April and accounted for a quarter of the unemployed last month. Over the past year, more than two million workers have left the workforce. As these workers resume searching for employment, they initially will be counted as unemployed and will elevate the unemployment rate until they find a job. Thus, a temporary rise in the unemployment rate back above 10 percent is a real possibility in the near term.