Economy adds jobs in April, unemployment decreases - but it’s complicated

    Northwestern certainly has a preprofessional campus, where job prospects motivate many students to study in Core for hours, students show up for career fairs and consistently update their résumé. With this attitude and the reality of graduation in June looming for seniors, the jobs report provides the information on employment and the state of the economy Northwestern students care about.

    Last week, the Bureau of Labor Statistics released the April 2014 data from its monthly checkup on the United States’ economy, a set of measurements commonly used to survey the country’s degree of economic recovery. The report provides college students with some real numbers on job prospects, gives politicians campaign fodder or a sense of success and helps the Federal Reserve plan policies appropriately.

    Total employment rose, with a surprisingly high amount of jobs added. In fact, unemployment decreased to its lowest rate since before the financial crisis, but the significance of this change is more complicated than a simple decrease.

    The Federal Reserve may adjust monetary policy based on the report of unexpected rates of job growth. Reuters reported that after the report, traders speculated the Fed may raise interest rates earlier than expected. 

    Reports of employment gains hold special political significance for the Democrats hoping to emphasize the economy in the November midterm elections. 

    Total employment rose by 288,000. In contrast, job growth has averaged 190,000 each month over the past year.

    “Now we’ve had three months of over 200,000 jobs created per month job growth, which is more than the population rate and what we need for the unemployment rate to go down,” economics professor David Berger said. “So it looks at least in the private sector that firms are hiring people and creating jobs quickly. In the public sector actually employment hasn’t recovered.”

    Strong rates of hiring are usually positive indicators, but some economists speculate the high numbers may be attributed to a catch-up from prior months rather than a sustainable trend.

    In April, unemployment fell by 0.4 percentage points to 6.3 percent, the lowest rate since September of 2008, just before the financial meltdown. Unemployment in Illinois stood at a rate of 8.4 percent based on March data, which will be updated next week with April numbers. As illustrates, unemployment varies greatly by region.

    Before accepting the unemployment rate as an absolute measure of progress, take a look at the other factors affecting the rate. The unemployment rate measures the percentage of people in the labor force who are unemployed. However, the labor force only includes people who have a job or who are actively looking for work.

    When people drop out of the labor force, the unemployment rate may decrease because people who cannot find jobs are no longer included in the statistic. After searching for work for months, an unemployed individual discouraged by job prospects who stops looking for a job has dropped out of the labor force. Although this decreases unemployment, it’s not a good sign for the economy.

    To understand the unemployment rate, analysts look at the labor force participation rate. The rate measures the labor force as a member of the civilian non-institutional population. In April, the labor force participation rate fell by 0.4 percentage points to 62.8 percent. The participation rate hasn’t been that low since December — and before that, since March 1978. 

    While the participation rate may be discouraging, Berger noted that the rate moves around a lot over time while working with a sample size to measure the statistic. In April, the civilian labor force decreased by 806,000 but followed an increase of 503,000 in March.

    “It’s good that the unemployment rate is lower and that the economy added jobs in April and I do think it points to the fact that we’re back toward a stable recovery,” said Kellogg student Jack Rosenberg. Rosenberg noted that low labor force participation, as seen throughout the recession, shows weakness still exists in the economy overall.

    The story on labor force participation may not be entirely bad, however. Los Angeles Times writer Jon Healey pointed out that the number of discouraged workers increased in April but that, “prime candidates for becoming ‘discouraged workers,’” aka individuals who have been unemployed for 27 weeks or longer, decreased by 287,000.

    Additional factors in labor force participation include the rates of re-entry to the labor force, which experienced a relative decrease, and the number of new entrants.

    Listen up, Northwestern students concerned with post-graduation job prospects. For individuals over the age of 25 holding a bachelor’s degree or higher, the April unemployment rate was 3.3 percent. The participation rate for this level of educational attainment is 75.1 percent. 

    For Weinberg sophomore Mark Towster, the unemployment rate has been important in his decisions at Northwestern. Looking at unemployment rates for law school graduates as a freshman and hearing personal accounts of struggles to find a job, Towster was persuaded to change his path and ultimately study economics.

    Now a member of the Undergraduate Economics Society, Towster said he felt generally positive about the employment report because of the jobs added. Towster said found the decrease in the participation rate alarming, but noted the complexity and variety of factors behind the rate.

    Hours worked and wages earned remained the same from March to April, with little change from a year ago.

    “We’d like to see more wage growth, wages haven’t gone up very much,” Berger said. “The labor market still seems pretty slack but it does seem like firms are trying to hire people, at least in the private sector.”

    As New York Times senior economics correspondent Neil Irwin wrote, “If the economy is to ever expand more robustly, it will require workers to make more money, giving them the income to buy more goods, services and houses; in April at least, there was no progress on wages.”

    News of stagnant wages affect both parties politically, with a divided debate over the minimum wage. Democrats are campaigning for an increase, which Republicans have struck down in favor of a different approach to improve opportunities for workers. 

    The bottom line is that the statistics behind this most recent jobs report are complicated and likely reflective of short-term trends — only time will reveal more reliable data.


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