Kokomo Tribune; Kokomo, Indiana

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May 5, 2014

5 cautionary signs tucked into April's jobs report

WASHINGTON (AP) — Employers added a sizable 288,000 jobs in April.

Hiring in February and March was better than first thought.

The unemployment rate plunged to 6.3 percent from 6.7 percent.

At first glance, Friday's U.S. jobs report suggested that the agonizingly slow 5-year-old economic recovery had burst into a full sprint.

Yet several cautionary signs emerged from the report, starting with that spectacular plunge in the unemployment rate.

Here's why: The government uses two surveys for the jobs report. The job gain comes from a survey of businesses, the unemployment rate from a survey of households. Sometimes, the two conflict.

The survey of businesses showed 288,000 more jobs. Yet the household survey, in calculating unemployment, found that 73,000 fewer people had jobs.

Why did the unemployment rate sink? Because 806,000 fewer people were in the workforce. Many retired or ended their job hunts. And fewer-than-expected people began looking for work.

The unemployment rate typically drops when fewer people seek work: If they're not hunting for a job, they're not counted as unemployed.

All of which points to an underlying weakness in an otherwise improving job market.

"When you have a robust economy, you don't get these mixed messages," said Douglas Holtz-Eakin, a former head of the Congressional Budget Office and now president of the conservative American Action Forum.

Here are five cautionary signs from April's jobs report:

543,000 FEWER PEOPLE SEEKING WORK

Let's dive a bit deeper into that unemployment rate. People flow into and out of the job market each month. Some leave for school; others return, armed with a degree. Some quit to raise a family. Some apply for jobs after their kids start kindergarten. In April, the number of people who began looking for work fell off a statistical cliff.

This suggests that the recovery lacks the kind of gravitational force needed to draw more workers back into the fold. Just 58.9 percent of the working-age population holds a job. That's down from 62.9 percent before the recession began at the end of 2007.

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