Discouraging Numbers Hidden By A Positive Jobs Report

The April jobs report came in much better than expected, though the shrinking labor force leaves some unanswered questions.

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SCOTT SIMON, HOST:

This is WEEKEND EDITION from NPR News. I'm Scott Simon. And this week, the U.S. Commerce Department reported that economic growth had nearly flatlined for the first three months of 2014. So the initial reaction to yesterday's glowing April jobs report is pretty exuberant. Hiring picked up more than expected with an increase of 288,000 jobs. And there was a big drop in the unemployment rate to 6.3 percent. But examining some of the details of the report caused some analysts to check their enthusiasm. Here's NPR's Yuki Noguchi.

YUKI NOGUCHI, BYLINE: For the past three years, Heidi Shierholz has gotten used to saying pretty much the same thing about the Labor Department unemployment reports, except yesterday.

HEIDI SHIERHOLZ: This was one of the stranger reports I've seen in a long time.

NOGUCHI: Shierholz is an economist with the Economic Policy Institute.

SHIERHOLZ: At first blush, it looked great. The unemployment rate dropped substantially to 6.3 percent. But you look one level deeper and you find that that drop in the unemployment rate was not for good reasons.

NOGUCHI: The not good reason is that the labor force shrank. The labor force is not just made up of people who are working. It also includes people who are looking for work. The percentage of Americans in the workforce fell back to one of the lowest levels in decades.

MICHAEL STRAIN: The labor force shrunk by 800,000 workers. That erases gains in the labor force from the last two months.

NOGUCHI: Michael Strain is a resident scholar at the American Enterprise Institute. He says the decline creates a kind of mathematical distortion. It makes the jobless rate seem healthier than it is, but only because fewer people are counted as unemployed because they simply aren't looking for work anymore. In a normal job recovery, you'd expect to see more people coming back into the workforce.

STRAIN: So we want the unemployment rate to decline because people are coming into the labor force and firms are hiring them, not because people are leaving.

NOGUCHI: Strain says one of the oddities of the report is the fact that hiring increased, but that didn't translate into greater motivation among prospective workers feeling more optimistic about their chances of finding a job. And Strain says that probably didn't happen because there still isn't enough momentum to motivate people off the sidelines.

STRAIN: I'm left with roughly the same view of the recovery as I had before the report.

NOGUCHI: The White House was quick to point out the good news, the big increase in the number of people on business payrolls. But Jason Furman, the chairman of president's Council of Economic Advisers, also said this.

JASON FURMAN: We never try to get too excited when it's above expectations. We never try to get too down when it's below expectations.

NOGUCHI: But Furman adds, this year is already looking better than last year and not just because of the pickup in hiring. Last year, the economy had to contend with the sequester, a government shutdown, and a debt ceiling debate.

FURMAN: This year, we've had a budget agreement that bought back 60 percent of the sequester. We dealt with the debt limit without any drama.

NOGUCHI: And that has the White House optimistic the job market will continue to improve. Yuki Noguchi, NPR News, Washington.

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