Each month we get information on the national unemployment rate and the change in payroll employment. These figures are based on two surveys. The unemployment rate is based on a survey of households, and the number of jobs created is based on a survey of businesses.
For the month of April there was a significant drop in the unemployment rate from 6.7 percent to 6.3 percent.
Part of the reason for the drop in the unemployment rate was that the labor force contracted in April. However, the prior three months the labor force expanded by a greater amount, so these figures tend to average out over time.
To put the 6.3 percent unemployment rate in perspective, we saw a peak in unemployment of 10 percent in late 2009. A normal unemployment rate is considered to be around 5 percent. We must realize that even in a strong economy, there will always be some unemployment due to people changing jobs and businesses restructuring.
In California the most recent data point was March, where the unemployment rate was 8.1 percent. Most likely California’s figure came down in April with the national figures, but it still remains relatively high. By comparison, North Dakota, which is enjoying an energy boom, had an unemployment rate of 2.6 percent in March.
The payroll survey, which is the one economists give more weight to, showed an increase of 288,000 jobs for April. This compares to an increase of 203,000 for March and 222,000 for February. The last several years, the monthly figures have been averaging about 175,000 to 200,000 net new jobs each month.
These types of job gains are consistent with an economy growing at a moderate pace. However, they are less than previous economic recoveries where employment gains were sometimes increasing at 500,000 jobs in some months.
Average annual wage gains have still remained subdued, increasing at only 1.9 percent for the past 12 months. As the unemployment rate continues to fall, I would expect wage gains to gradually increase at a faster pace.
Recently we saw the news that Toyota will move approximately 3,000 jobs to Texas over the next several years. This has fueled concern that our area will continue to suffer high unemployment given that we are not business friendly.
A couple points to consider is that while 3,000 jobs is significant, it is less than .1 percent of the total employment of Los Angeles county. We often hear reports about company layoffs or those moving out of state, but not of businesses adding jobs. It is typically small and medium sized companies that are job creators, but that is not publicized.
Since the bottom of the recession, there have been over 1,000,000 jobs added in California. While high unemployment is still a problem in the Los Angeles area, things are better than they were several years ago. The housing market would not be as strong as it is, if there were more jobs being lost than being created.
Employment numbers can jump around from month to month, and it is possible the figures for May, may not be as strong as they were for April. However, other pieces of economic data, such as surveys of purchasing managers have shown recent improvement, so it appears the economy is getting better.
We will almost certainly see better economic growth for the balance of the year versus the first quarter. It will still take considerable time for the unemployment rate to come down to something approaching full employment, but at least it is going in right direction.
