The labor market is not one number

The labor market showed surprising resilience in the face of economic uncertainty driven by tariff policies and government layoffs and the slowdown in GDP growth in the first quarter. The economy added 177,000 jobs in April. The numbers for January and February were revised down by 58,000 across February and March, leading to a combined lower employment gain than reported originally. Employment growth was spread across healthcare, transportation and warehousing financial activities and social assistance. However, the federal government lost 9,000 jobs. Monthly employment gains over the previous 12 months averaged 152,000 so this month shows an uptick over trend.

However, it’s important to not focus too much on one month’s report and to remember that the true picture of the labor market comes from looking across several key indicators. This is particularly true with continually changing government policies that are likely to impact the economy and business decision making over the next several months.  

Here are some key metrics to track where some are showing improvements over time and others a marginal deterioration. 

Unemployment Rate: the unemployment rate stayed steady at 4.2 percent. This is well above 3.9 percent a year ago. Across demographic groups, men and women had unemployment rates of 4 percent and 3.7 percent respectively. However, there were larger differences across Whites (3.8 percent), Blacks (6.3 percent) and Hispanics (5.2 percent).

Number of Unemployed: the number of unemployed is currently at 7.2 million relative to 6.5 million a year ago. Within this group, those unemployed for longer than 27 weeks (long-term unemployed) is at 1.7 million. This is up from 1.3 million a year ago. The long-term unemployed are 23.5 percent of all unemployed, a slight uptick from the previous month.

Labor Force Participation: LFP is currently at 62.6 percent which is lower than pre-Covid. In February 2020, LFP was 63.3 percent

U-6 rate: this rate captures three categories of people (1) total unemployed (2) all persons marginally attached to the workforce (wanting work but have not looked for work in the previous 4 weeks) and (3) total employed part-time for economic reasons (people who prefer full-time work but have settled for part-time work). The U-6 rate is at 7.8 percent up from 7.4 percent a year ago. During COVID, in April 2020, this was at 22.9 percent.

Wage Growth: Average hourly earnings have increased by 3.8 percent year on year. With inflation at 2.4 percent, this suggests workers are seeing real wages growing.

This snapshot suggests that while the headline numbers suggest a labor market that is decently healthy, monitoring these metrics and responding early to softness in the labor market will be critical to maintaining a healthy economy.