May 3, 2024

The unemployment rate rose 0.1% in April to 3.9% after having fallen 0.1% in March  In April the labor force rose by 87 thousand..  Employment rose by 25 thousand.  As a result, the number of unemployed workers rose by 63 thousand  and the unemployment rate rose 0.1% to 3.9%.   In contrast, payroll employment rose by 175 thousand in April compared to the 25 thousand increase in civilian employment.

How come the two estimates of employment are different?  First, the two are figures are derived from separate data streams.  The payroll number is calculated from employment numbers reported by a large number of employers across all industries.  Employment for the unemployment rate calculation is derived from knocking on doors and asking people if they have a job.  It is known as the  household survey.  It tends to be more volatile than the payroll employment data.  One conceptual difference is that the household survey includes people who are self-employed which would not be captured in the establishment survey.  In the end, there is always monthly noise between the two series.  Over time the two surveys seem to show roughly comparable gains in employment.

In the wake of the Fed’s series of rate hikes the labor market is doing particularly well.  The Fed considers full employment to be 4.0% which means that at that level everybody who wants a job has one.  Given that the unemployment rate is slightly below the full employment threshold.  Ordinarily in that situation there would be continuing upward pressure on wages as firms bid against each other to get the required number of workers and as workers and unions try to offset some of the decline in real earnings that has occurred over the past two years.  However, the influx of immigrant workers crossing the border from Mexico appear to taking some low-paying jobs as they begin to adjust to life in the United States which, in turn, is allowing hourly earnings to grow more slowly than had been anticipated.

While the official rate is the most widely used, the reality is that the official rate can be misleading because it does not include “underemployed” workers.  There are two types of “underemployed” workers.  First, there are people who have unsuccessfully sought employment for so long that they have given up looking for a job.  Second, are those workers  that currently have a part time position but indicate that they would like full time employment.  The total of these two types of underemployed workers are  “marginally attached” to the labor force.  The number of these workers has risen in recent months as some people appear to have gotten a part-time job but would like a full-time position..

To incorporate the impact of these workers who are marginally attached to the labor force, we should probably be focusing on the broader measure of unemployment which rose 0.1% in April to 7.4% after having been unchanged in March.   Full employment for this measure of unemployment is somewhere around the 8.0% mark.

Given the steady gains in employment we look for GDP growth of 3.0% growth in the first quarter.

Stephen Slifer


Charleston, SC