U.S. April unemployment report: Underemployment a growing problem

Ted Dabrowski John Klingner The U.S. Bureau of Labor Statistics announced today that the national unemployment rate declined to 7.5 percent in April from 7.6 percent in March. Total nonfarm payroll employment rose by 165,000 in April, up from a revised 138,000 payroll jobs in March. source: U.S. Bureau of Labor Statistics This amount of job creation...

Ted Dabrowski
John Klingner

The U.S. Bureau of Labor Statistics announced today that the national unemployment rate declined to 7.5 percent in April from 7.6 percent in March. Total nonfarm payroll employment rose by 165,000 in April, up from a revised 138,000 payroll jobs in March.

source: U.S. Bureau of Labor Statistics

This amount of job creation continues to lag the more than 250,000-plus needed to bring the nation’s employment back to full health. The continuous drop in the nation’s unemployment rate does not reflect a true jobs recovery, but rather a decrease in the number of people actively looking for work. The labor force participation rate remained essentially unchanged at 63.3 percent, the lowest it has been since 1979.

In all, 11.7 million Americans remain unemployed. And in a broader measure of joblessness, there are more than 21 million people who are unemployed or underemployed, a rate of 13.9 percent.

The American Enterprise Institute’s James Pethokoukis discovered some other disturbing trends in April’s data:

1. The labor force participation rate was dead in the water. If it were back to January 2009 levels, the U-3 unemployment rate would be 10.9 percent. Demographics are playing a role here. But even taking that into account may put the real unemployment rate in the 9% to 10% range.

2. Only 53.9 percent of private industries added jobs last month, the second lowest of the labor market recovery, according to JPM.

3. Even with the unemployment rate at a misleadingly low 7.5 percent, it is way above where the Obama White House predicted it would be if Congress passed the 2009 stimulus, as the above chart shows. Back then, Team Obama thought 5 percent was the economy’s full-employment rate but recently has upped that number to 5.4 percent.

4. If the economy continues to add jobs at the 2013 pace of 196,000 a month, the labor market would return to pre-recession employment levels in seven years and ten months, according to the Hamilton Project’s “jobs gap” calculator.

The lack of robust job creation nationally is bad news for not only the nation, but for Illinois as well. The state is already suffering from the second-highest unemployment rate in the nation, at 9.5 percent. It also bodes ill for the state’s economy if much of the limited economic progress is due to part-time employment rather than full time jobs.