Markets Drop After April Jobs Number

Worker Subtracted - IllustrationAccording to the BLS (Bureau of Labor Statistics), the United States created 115,000 new jobs in April and the national unemployment rate dropped to 8.1%.

Great success! Right?

Not so much - the markets dropped after the April jobs report was released, which should give you a clue as to how strong the number actually was (the DJIA is currently down 1.27% while the NASDAQ is down over 2%).

So what went wrong with this jobs report?

First off, economists were predicting, on average, that the country would add 165,000 jobs in April. 115,000 jobs were added.

But Dave, you may be asking, why did the unemployment rate drop then? Isn't a falling unemployment rate good news for the economy?

Here's the thing - in order to be considered officially unemployed, you need to be actively looking for work. So, let's say that you have had such little success finding a job that you have decided to give up, or at least put off trying to find a job for a few months. In this case, the government would not consider you to be employed or unemployed - you would simply be a person that is not in the labor force, and you will not be counted in the national unemployment number.

So, in April, the number of people "not in the labor force" rose by 522,000 to 88,419,000. The number of employed people dropped from 142,034,000 to 141,865,000, while the number of unemployed people dropped from 12,673,000 to 12,500,000. This gives us a national unemployment rate of 8.1%, even though there were less people with jobs than the month before. So, the unemployment rate dropped because over a half million Americans moved to the "not in labor force" category. As a result, the labor force participation rate dropped from 63.8% to 63.6%.

This is why April's unemployment number was NOT good, despite the fact that the unemployment rate dropped to 8.1%. Anybody who tries to spin the number in a positive manner doesn't know what they are talking about.

Source: - April Jobs Report

Filed under: General Knowledge

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