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Economy Adds 288,000 Jobs in April, Sharp Drop in Labor Force Leads to Plunge in Unemployment

Voluntary part-time employment has been rising, which is a predictable effect of the Affordable Care Act.

Voluntary part-time employment has been rising

The economy added 288,000 jobs in April. With upward revisions to the prior two months’ data, this brings the three month average to 234,000. This is highest three month total since the economy added 829,000 jobs in the first three months of 2012. The household survey showed unemployment rate falling from 6.7 percent in March to 6.3 percent in April, but the drop was entirely the result of 806,000 people leaving the labor force. Employment, as measured in the household survey, actually fell by 73,000. The employment-to-population ratio (EPOP) remained unchanged at 58.9 percent.

Women and white teens were the big gainers, with the unemployment rate for women falling by 0.5 percentage points to 5.7 percent. The unemployment rate for white teens fell by 2.4 percentage points to 15.9 percent. The unemployment rate for black teens increased by 0.7 percentage points to 36.8 percent, although their EPOP also rose by 1.2 percentage points. The unemployment rate for Hispanics also fell sharply from 7.9 percent to 7.3 percent.

There are some striking patterns in the household data. Less educated workers appear to be the biggest job gainers. Over the last year, the unemployment rate for workers without high school degrees has fallen by 2.6 percentage points, while their EPOP is up by 1.2 percentage points. By comparison, the unemployment rate for college grads decreased by 0.6 percentage points, and their EPOP is unchanged. The unemployment rate for college grads is still up by roughly 1.3 percentage points from its pre-recession level. Although at 3.3 percent, it is still less than half the 8.9 percent rate for workers without high school degrees.

The number of workers who are involuntarily working part-time continues to drop. The average for the first four months of 2014 was more than 560,000 below the average for the same months in 2013. By contrast, voluntary part-time employment appears to be rising. The average for the first four months of 2014 was 250,000 higher than for the same months in 2013. A rise in voluntary part-time work is one of the predicted results of the Affordable Care Act (ACA) as many workers may now choose to work part-time and get insurance through the exchanges rather than their employer.

Change in Part Time Employment, by Reason

Unemployment among construction workers continues to fall. The 9.4 percent rate for April is below the 9.5 percent rate for April of 2004, although still higher than the rates reported at the peak of the housing bubble.

The job growth in the establishment survey was widely spread across industries. Construction added 32,000 jobs, bringing the average over the last three months to 24,000. Manufacturing added 12,000, roughly the same as it pace over the last three months. After losing 2,300 jobs in March, likely due to weather, retail added 34,500 jobs in April.

The professional and technical services category continues to be an important source of job growth, adding 25,100 jobs in April, roughly the same as its average over the last three months. Employment services added 27,600 jobs, roughly the same as its average over the last eight months. The motion picture industry still appears to be shedding jobs. Employment in the industry is down by 50,300 (14.1 percent) from year ago levels.

Job growth in health care was a moderate 18,700, almost exactly equal to its average over the last year. The ACA does not appear to be leading to a surge of jobs in the sector. Government employment rose by 15,000, driven by an increase in local government employment of 17,000. Local government employment is now 68,000 above its year ago level with both state and federal employment down.

Wage growth remains nearly constant with the average hourly wage rising at a 2.1 percent rate over the last three months, roughly the same as its 1.9 percent increase over the last year.

On the whole, this is a very positive report. While the April job growth was likely inflated as a result of bad weather in prior months, the three month average is still near the peaks for the recovery.

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