April’s Unemployment Research Notes

by Jim Baird on May 7, 2010

At 9.9%, the unemployment rate increased for the first time in six months, a result slightly higher than the market had broadly expected.  The sharp increase in non-farm payrolls was a very positive sign that the recovery is becoming entrenched.

Unemployment remains near its cyclical peak of 10.2%, just shy of the highs reached during the early ‘80s.  Moving forward, the unemployment rate could bump above 10% again as increasing optimism over job creation brings more workers back into the workforce.

We are seeing positive signs of job creation, in spite of being just off of historic highs in the unemployment rate.  April’s increase of 290,000 in nonfarm payrolls marks the largest monthly increase in more than four years.  At the same time, the increases in previously reported results from February and March suggest that momentum has been building to a greater degree than previously believed.

Increases in business and consumer spending as demonstrated by three consecutive quarters of economic growth also point to employers needing to ramp up hiring. 

While the recovery remains fragile given tight credit conditions and the substantial debt carried by many consumers, the recent pickup in spending should continue to support job creation in the months ahead.

What we’re seeing is the virtuous cycle of spending creating the need to expand the labor force and consequently putting those formerly without jobs in a position to spend more as well.

All things considered, today’s report is a positive sign, but we remain cautious on the outlook for a strong recovery within employment.  Given the broad headwinds the economy faces, we continue to expect a long road back to full employment even in the midst of these nascent signs of improvement.

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