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Recovery Brings Job Gains

Manufacturing Has Added Over 100,000 Jobs in 2010

SOURCE: AP/Amy Sancetta

A worker puts labels on Playaway self-contained, battery-powered audio player books at the Findaway World headquarters in Solon, OH. Manufacturing added 44,000 jobs last month—more than double the jobs added in March.

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The Department of Labor reported that the economy added 290,000 jobs in April, which is the largest one-month gain since March 2006. Payroll jobs in February and March were also revised upward so that over the past three months the economy has added an average of 186,000 new jobs per month. While the federal government continued to ramp up staffing to conduct the U.S. Decennial Census, hiring 66,000 workers, the bulk of job gains were in the private sector and widespread across industries.

This pace of job creation is certainly good news. Last week, we learned that the economy grew by 3.2 percent during the first quarter of 2010 and today’s data show that this growth is beginning to pull the labor market out of its slump. We need to continue to see job creation at April’s pace to work toward recovering the 7.8 million jobs lost over the course of this recession and create enough jobs for new labor market entrants due to population growth.

But while a number of positive indicators point to stronger employment gains moving forward, there are a number of trends pointing to the need for continued focus on policies to pave the way for sustained job creation.

One looming challenge is that state and local governments are struggling with lower revenues brought on by high unemployment, which is leading them to slash budgets, and they laid off another 6,000 workers last month. For the recovery we are in to be a strong one we need to make sure that states do not drag down growth by continued lay-offs in the months to come, since state and local governments account for one in seven U.S. workers. The Local Jobs for America Act, introduced by Rep. George Miller (D-CA), would create approximately 1 million jobs by providing $100 billion in funds to be used over two years to protect state and local government jobs and create local government and nonprofit sector jobs.

On the positive side, manufacturing added 44,000 jobs last month—more than double the jobs added in March (see chart below). The economy has not added this many manufacturing jobs in any single month since 1998. Certainly, one month’s data does not indicate a revival of U.S. manufacturing, but this is a positive indicator that the recovery is taking hold in the private sector and spurring the kind of economic growth that leads to job creation. Overall, manufacturing has added 101,000 new jobs in 2010.

Employers are also continuing to hire temporary workers as they have been doing for seven months now. Employers added 26,000 temporary workers in April, about half as many as they added in the fall. Today’s data indicate that some employers are now moving into regular hiring, and, if the recovery is indeed taking hold in the labor market, over the next few months we should see continued temporary-help hiring at lower rates than last fall alongside stronger regular hiring.

Hours are also up. The average weekly hours for production and nonsupervisory employees rose from 33.1 a year ago up to 33.4 in April. Average overtime hours in manufacturing are up to 3.9 hours per week, from 2.8 a year ago.

It continues to be the case, however, that those out of work are facing an exceptionally tough job market and the unemployment rate edged up to 9.9 percent in April as the labor force increased sharply. The story for those out of work and seeking employment continues to be worse than ever recorded since 1967 when the Bureau of Labor Statistics began examining how long people stay unemployed. The typical worker is taking a record 21.6 weeks to find a new job and a record 45.9 percent of those out of work have been unemployed and pounding the pavement in search of a new job for at least six months.

There are 6.7 million long-term unemployed workers. They can now receive extended unemployment benefits, but this program will expire again on June 2 unless Congress acts. We need to continue to provide support for the long-term unemployed through at least the end of 2010 given the exceptionally long length of time it is taking workers to find a new job, the influx of job seekers, and the pace of job growth. Reforming the system to allow states to cycle off long-term unemployment benefits as they emerge out of the recession rather than having an arbitrary cut-off date would be a good way to make the system more responsive to the labor market.

The economy also saw a large increase in the number of people reentering the labor market in search of work in April on top of these long-term unemployed who have been actively searching for a new job. This tends to happen as the economy begins peeking out of a recession and those who had become frustrated with their job search and “dropped out” of the labor force start looking for work again. Now that firms are beginning to hire again, people are reentering the job market. The share of the unemployed who are reentering the labor market after a spell not working or seeking work is now 24.7 percent, up from 21.9 percent in December.

More people searching for work raises the unemployment rate. In April, the labor force participation rate rose by three-tenths of a percent as 1.5 million have entered the labor force. Over the past three months, labor supply has risen by half a percent—the largest three-month increase since 1989. But really, this a story about male workers: Labor force participation among adult men has increased by 0.9 percentage points over the past three months—the largest three-month gain on record since 1953.

Nominal wages for production and nonsupervisory employees grew by an annualized rate of 1.7 percent over the past quarter, while the Consumer Price Index, which measures changes in prices, rose by 2.4 percent. Thus, while workers’ wages are rising, they are not keeping pace with inflation, which is typical in periods of high unemployment. We will likely not see strong wage growth until the unemployment rate comes back down.

Clearly, today’s report is good news. The American Recovery and Reinvestment had has been credited with saving or creating 2.2 to 2.8 million jobs and added the boost that got the private sector hiring again. But there are still 15.3 million people who are unemployed and actively seeking work. And even if we add jobs every month at this month’s pace, it will take us more than four years to put each of these workers into a job, and that doesn’t even take into account our growing population. There is growing optimism that the economy is moving on the right track, with 45 percent of Americans reporting that the economy is already improving. But the challenge of job creation is not yet behind us.

Heather Boushey is a Senior Economist at the Center for American Progress.

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