Employment Situation Jumbled

The payroll survey is considered to be a better indicator of labor market conditions due to a much larger sample than that of the household survey, but it's hard to dismiss the increase in the unemployment rate. Courtesy of NAHB

The employment situation report for April from the Bureau of Labor Statistics provided conflicting signals about labor market conditions.

Payroll employment survey indicated a net increase of 244,000, including an increase of 268,000 to private payrolls, and the household survey indicating a reduction of those employed of 190,000 with an increase in the unemployment rate to 9 percentfrom 8.8 percent.

The signals from the payroll survey are promising. Total payroll employment has shown solid growth for three consecutive months, averaging 233,000 and private payrolls averaging 253,000. If the increase of 244,000 had been mirrored in the household survey, the unemployment rate would have slipped to 8.7 percent instead of rising to 9 percent.

It would be better news if the rise in the unemployment rate was the result of discouraged workers returning to the labor force, a signal of their increased confidence in the ability to find a job, but that's not the case. The labor force increased by 15,000, the number of employed persons declined by 190,000, resulting in a 205,000 increase in the number of unemployed persons and 0.2 percentage point increase in the unemployment rate.

Recognize the big picture that 22 months into the recovery, private payroll employment appears to be finally sustaining the growth necessary to reduce the still uncomfortably high unemployment rate. The government sector (primarily state and local), roughly 16 percent of total payroll employment, is still contracting with little sign of near-term recovery basedon the condition of federal, state and local government budgets.