The Bureau of Labor Statistics reported last Friday that employers added only 115,000 nonfarm jobs in April, far below expectations. The numbers from December through February easily doubled that, averaging over 250,000 a month and raising expectations and hopes of economic recovery. April’s disappointing gain (projections had estimated around 165,000 jobs for April) has sparked talk of economic slowdown. This news comes on the heels of an earlier report showing claims for unemployment benefits dropped in April, lowering the nominal unemployment rate a tenth of a point to 8.1%.
Combined, these reports lead experts to bitter conclusions, among them, that the unemployment rate is falling not due to job creation but to unemployment fatigue: people dropping out of the workforce entirely. In some cases unemployment benefits have become exhausted, in others, workers have become exhausted looking for jobs and have given up. These two are often tied together, as many workers who might have stopped searching earlier were encouraged to keep at it a few months more due to the extension of unemployment benefits (a program requirement is that workers be actively seeking a job). In an election year, news of this nature has sent political interests on the attack, with republicans decrying the Obama administration’s policies on job creation, and democrats rushing to defend them. The media circus of campaigning makes it harder to process what is actually happening.
Is it really that bad? Though job creation slowed in April, a gain was still posted, and the strong numbers leading up to it could indicate a natural pause in hiring cycles. Also, previous job reports have all been revised upwards as more information surfaces, prompting some hope that April’s numbers could show improvement in the next few weeks. Other possible reasons behind the hiring dip include Baby Boomers, women, college cycles, the government, and the weather.
Part of the worker decline (“dropping out of the workforce”) can be tracked to the simple math of Baby Boomers, as the first wave of the generation enters retirement. As the largest living generation begins to retire, the weight of their numbers will inevitably alter the workforce. Some forecasters offer hope that the jobs retiring boomers leave behind could soon reemerge as new hires in future months. Additionally, women are increasingly choosing not to do paid work (work outside the home) at the highest rate since before the 80’s empowerment movements drove them into the workforce in large numbers. Socially, being a homemaker or stay-at-home mom has started to reemerge as an accepted lifestyle choice for women, and in some cases the economic pressures of childcare costs has made this option the most acceptable financial situation for families. Meanwhile, college enrollment, especially among women, is increasing rapidly. Many workers are taking advantage of training, retraining, and other educational opportunities to reset themselves for the new economic landscape, a good sign for the economy in the years ahead as a more highly-educated, highly motivated workforce begins to emerge.
The government is absolutely a factor in the current employment figures, though not in the way some people think. The combined political forces of reduced spending and reduced taxing have caused significant budget shortfalls in the public sector, which has been shedding jobs consistently since 2009. Public job losses (15,000 in April), undermine the job growth in the private sector (130,000 in April), reducing the total job creation numbers as they offset. Additionally, tight budgets cause grants and other funding opportunities to dry up, preventing many would-be jobs, both in public and private sectors, to disappear at inception.
Can we also blame it on the weather? The weather is a factor in seasonal hiring rates. The mild winter is credited with the higher than usual hiring rates during the colder months. The early onset of the hiring season could well be reflected in these spring lows, as companies jumped to hire in what was traditionally a slow-hire season and now pause to integrate their new hires during what was traditionally the season hiring picked up. Economists say the true test will be the upcoming “graduation” months, as spring-to-summer ushers in a fresh wave of job-ready graduates and (hopefully) the traditional uptick in consumer spending and business expansion.
Overall, April wasn’t great, but it’s too soon to tell if the economy is really experiencing a slowdown, or if this low is simply a part of the cycle. “My guess is the weather made job growth look too strong in the first couple of months, and now it looks too weak as payback for the warm winter weather,” said Paul Ashworth, chief United States economist for Capital Economics. “It’ll probably settle somewhere in between.” The NY Times also reports that companies are producing more these days with fewer workers, leading many o wonder just what “normal” is anymore. A fall in productivity last quarter (perhaps due to overworked employees unable to keep up the pace?) may lead companies to increase their workforces to bring production back up.
Only time will tell. Until the future reveals itself, many economists and business experts are cautioning people to reserve judgment.
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About David Goldstein — David Goldstein is an Owner and Founding Partner of Colibri Real Estate, LLC. which operates online education providers Colibri Real Estate, Insurance License Express and License Tutor. Follow him on Twitter.