Jobless rate drops below 4%, but questions remain
President Donald Trump’s tweet told the story: “4% is broken!”
April’s unemployment rate came in at 3.9%, a level we haven’t seen since late 2000. It’s an impressive feat to be in the 3% range. Only a short time ago, in 2009, we saw the jobless rate hit double digits. Add April’s number to stronger economic growth, tax cuts and new stock market highs: Perhaps it’s time to be breaking out the champagne glasses.
Or, are we celebrating too soon? The unemployment rate should not be treated as a tell-all for the health of our economy. The Bureau of Labor Statistics announced the U.S. added 164,000 jobs in April – higher than in March, but lower than what economists were expecting. That’s the 91st consecutive month of jobs gains – a streak never seen before.
But while the number of jobs available increases, the actual number of new humans needed to fill these roles continues to dwindle. And, no, there hasn’t been an Armageddon.
Instead, we have an aging Baby Boomer generation leaving the market, a lower birth rate, more freelancers and individuals working in the gig economy and simply a larger number of Americans who are just not actively seeking work.
The labor participation rate, the total number of people who are currently employed or in search of a job, fell in April to 62.8%, the second straight monthly drop. Many employers have said how difficult it is to find qualified workers. This month’s headline figure of 3.9% may be more of a reflection of the contracting labor market.
Actually, the biggest challenge faced is by those currently in the labor force. The average hourly earnings for private-sector workers rose only 0.1% in April, and yet many companies such as 3M, Whirlpool and Chipotle have started to increase prices in reaction to higher oil prices and trade war fears.
Higher prices along with no wage growth is putting an increasing strain on wallets. A few companies are spreading the wealth: Walmart has increased its hourly pay rate, and American Airlines is paying out $1,000 bonuses. But according to economic notes from JPMorgan Chase and Goldman Sachs, many corporations aren’t reinvesting the money saved from corporate tax cuts. Instead, like Apple, they are using the money to buy back shares and pay higher dividends – a win for investors.
While record low unemployment figures are a reason to celebrate, key questions about this economy remained to be answered. How will businesses solve the issue of finding employees? And how can we drive real-time wage growth? Sustaining long-term economic success will require policy makers to focus on not only the quantity of jobs created but also the quality of jobs and how Americans can benefit.
Kristina Partsinevelos is a business correspondent and economist at FOX Business Network. Follow her on Twitter @KristinaParts.