• By
  • Sudeep Reddy

Why would the unemployment rate increase in April if payrolls increased so sharply? The short answer: more people are looking for jobs.

The two figures, of course, come from different government surveys. The payroll numbers are based on surveys of employers, while the unemployment rate is drawn from surveys of households. The 290,000 payroll gain in April was far above the monthly gain of 100,000 or so that’s needed in normal times to keep the unemployment rate steady. Consistent gains of April’s size — even after excluding the 66,000 Census workers hired — would be key to bringing the jobless rate down.

The reported increase in the jobless rate to 9.9% from 9.7% wasn’t quite as sharp as it appeared on the surface. Unrounded, the figure actually rose to 9.863% from 9.749% in March. That’s about 0.11 percentage point. The unemployment rate is calculated by dividing the total number of unemployed people by the number of people in the labor force. When people re-enter the market to begin a job hunt again, they boost the number of the unemployed until they find a new position, boosting the overall unemployment rate.

In April, the civilian labor force rose 805,000 as more people joined the work force. That was the fourth straight monthly increase, amounting to a gain of almost 1.7 million people since the beginning of the year. Of the people added to the labor force in April, according to the household survey, 550,000 found jobs and 255,000 didn’t.

So, the rise in the unemployment rate was due to more people feeling that the economy is good enough to restart their job searches. That’s a good sign, even though it means more active competition for job-seekers.

If the trend holds, it also means that the days of 10% unemployment may not be behind us. That means continuing downward pressure on wages. And it could spell continued trouble for the long-term unemployed. The April report showed that the number of people unemployed for 27 weeks or more rose by 169,000 to 6.7 million — almost half of all unemployed people. The average duration of unemployment: 33 weeks, an increase from last month.



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