Economic growth has remained close to 2.0 percent for most of the recovery. However, employment has been growing at a pace of close to 250,000 per month for the last two and a half years. This combination of weak GDP growth and strong employment growth was associated with a collapse in productivity growth that had been completely unanticipated. With economic growth slowing further in the last two quarters, productivity growth had actually turned negative.
For this reason, it is not surprising that job growth would slow, as was reported for April. The 160,000 pace for April, combined with modest downward revisions for the prior two months brought the 3-month average to 200,000. The falloff in job growth was largely attributable to weak job growth in construction and retail, with the former adding just 1,000 jobs in April and the latter shedding 3,000. Both sectors added close to 40,000 jobs in March.
The news on the household side was mixed. While the unemployment rate remained steady at 5.0 percent, the employment rate fell by 0.2 percentage points to 59.7 percent. This was due to prime age (ages 25-54) workers leaving the labor force as the EPOP for prime age workers fell by 0.3 percentage points from 78.0 to 77.7. Presumably this reflects weakness of the labor market and not a sudden urge to retire among workers in their forties.
Some of the news in the household survey was positive. Most of the duration measures of unemployment fell and the share of unemployment due to voluntary quits rose to 10.8 percent, the highest level of the recovery to date.
Also, the number of workers involuntarily working part-time fell by 161,000 more than reversing a jump in March.
On the whole this report suggests that job growth may be coming in line with the slow pace of economic growth.
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