The Bureau of Labor Statistics (BLS) reported that the economy added 165,000 payroll jobs during the month of April with the private sector adding 176,000 payroll jobs. This was slightly above expectations of private forecasters. BLS also reported that the unemployment rate ticked down to 7.5%. The labor force participation rate remained steady at 63.3%, while the employment to population ratio ticked up to 58.6%.
Much of the positive news in the report was driven by significant upward revisions to data for March and February. The change in total nonfarm payroll employment for February was revised from +268,000 to +332,000, and the change for March was revised from +88,000 to +138,000. With these revisions, nonfarm employment gains in February and March combined were 114,000 higher than previously reported. In the private sector the total upward revision added 124,000 to previously reported gains.
Despite the positive gains, the private sector jobs gap remains at 4.1 million compared to the average of other post-World War II recovery and private sector payroll employment remains 1.8% or two million below the prior peak in January 2008.
The average monthly gain in private sector employment remains more than 100,000 less other recoveries in the post-World War II era. This number is calculated using percentage gains from cycle lows for private sector employment.
While the unemployment rate ticked down in April, the drop in the unemployment rate from its high of 10% in October 2009. If the labor force participation rate had not declined since January 2009, the unemployment rate would be 10.9% instead of 7.5%. As the following chart shows, this is well above the officially reported rate and the “stimulus promise” of 5.1%.
This point can also be observed by looking at the percentage of adult Americans who are counted as employed. The employment to population ticked up 0.1 percentage point to 58.6% -- only 0.1 percentage point higher than its reading when the unemployment rate peaked in October 2009.
Federal Reserve to Continue Quantitative Easing Program
Following its meeting on Tuesday and Wednesday of this month, the Federal Open Market Committee (FOMC) announced no major change in policy. The FOMC indicated that it intended to continue purchasing $40 billion per month of mortgage-backed securities and $40 billion in longer dated Treasury securities per month.
The FOMC announced that it would continue reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities. The FOMC also announced that a highly accommodative monetary policy stance would continue for some time after its bond buying program ceased.
The FOMC again voted to keep its Fed Funds target rate range at 0 to ¼ percent and indicated that the exceptionally low range for the Fed Funds rate would be appropriate as long as unemployment remained above 6 ½ percent and the one- to two-year forward inflation rate was no more than ½ percentage point above its target rate of 2 percent.