Hiring on the Rise, but So Is Unemployment

Today’s employment data from the U.S. Labor Department contains a seeming contradiction: jobs are more plentiful and yet the unemployment rate is up.

May 7, 2010
By Allison Landa, News Editor

Today’s employment data from the U.S. Labor Department contains a seeming contradiction: jobs are more plentiful and yet the unemployment rate is up.

According to the report, the economy grew by 290,000 jobs in April – the fastest pace since 2006. However, the unemployment rate also rose to 9.9 percent. What is going on here?

“More discouraged people who had given up on finding a job re-entered the labor pool and that is why unemployment is still high,” Marcus & Millichap Managing Director of Research Hessam Nadji told CPE. “This is a natural occurrence during a recovery.”

With the job increase the largest since March 2006, it’s tempting to believe a more solid recovery is under way. However, Nadji believes unemployment will lag by at least six months as more people start looking for jobs with the belief that more are now available.

“The more important indicator,” he said, “is that the last two months were revised up and the number for last month beat expectations substantially.”

In March, the U.S. economy gained 162,000 jobs. That compares to a loss of 14,000 jobs in February.

Nadji said that the hiring trend is sustainable based on several months of strong temporary employment hiring, which is another leading indicator. “However,” he warned, “the pace of growth will still lag past recoveries as the momentum of the economy will likely slow in the second half but stay positive.”