Watch stocks you care about
The single, easiest way to keep track of all the stocks that matter...
Your own personalized stock watchlist!
It's a 100% FREE Motley Fool service...
On the first Friday of each month, the government issues a much-awaited status report on employment in America. The jobs report is typically followed by celebratory coverage if more jobs were added and prognostications of doom if jobs were lost. Making sense of the jobs report isn't so simple, though. Here are nine things to keep in mind:
1. A big jump is nice, but if unemployment is still high, then the nation is still in a lot of pain, with many households in deep trouble. The last jobs report, for example, revealed that 165,000 non-farm jobs were added in April. But unemployment was at 7.5%, and the non-farm payroll count was 2.6 million jobs lower than its peak level in early 2008.
2. Trends matter, as much or more, than the actual gains or losses. If you look at a graph of the monthly jobs reports, you'll see that we've been posting gains for several years now, which bodes well. The rate of growth isn't as rapid as many would like, though. We're moving in the right direction, but not quickly.
3. Cumulative numbers matter, too. If recent jobs reports have been offering both positive and negative numbers, it's worth stepping back to take in the big picture: Overall in, say, the last year, have jobs been growing or shrinking? Even if the recent reports all offer gains, are they adding up to a lot of improvement, or have there mainly been a series of small gains?
4. Context and benchmarks also matter. As Ezra Klein explained in The Washington Post last year, a solid monthly gain in a healthy economy would be about 120,000 jobs added. Thus, a gain of 50,000 should be viewed as disappointing. And if we're trying to claw back from a recession and steep unemployment, we'd ideally like to see much more than 120,000. Meanwhile, compare the recent 7.5% unemployment rate to the 4.4% rate reported in 2006 and 2007.
5. Also important are the kinds of jobs added or lost. In April, for example, the manufacturing sector saw no gains or losses, when we'd much rather see gains.
6. Keep in mind, too, that the numbers in a recent jobs report are preliminary, and get revised later, either up or down. For example, in May, the jobs report for February was boosted considerably, from an initial gain of 268,000 jobs to a 332,000-job gain. The March number was hiked, too, from 88,000 to 138,000 jobs added. So a just-announced good number may soon enough be even better, or considerably worse. Indeed, a gain can become a loss, and vice versa. In other words, a just-released jobs report really doesn't matter as much as we might think it does.
7. The jobs report doesn't just exclude farm jobs. It also excludes many people who have simply given up on finding a job. It sheds some light on the issue, though, by reporting the labor-force participation rate, reflecting the percentage of working-age folks who are employed or looking for work. (We can never expect 100%, due to students, stay-at-home parents, and others.) In recent years, this number has been declining rather steadily, as our economy has been taking a long time to heat up again. It generally doesn't bode well if more and more people have given up.
8. There are more details available to those interested, too. For example, while the overall unemployment rate in April was 7.5%, it was 24.1% for teenagers, 13.2% for African-Americans, and 9% for Hispanics. The "long-term unemployed," who have been seeking work for at least 27 weeks, saw their ranks shrink by 258,000, but remain at a significant 4.4 million.
9. As you're probably realizing, the jobs report isn't just about one number. It offers updates on several key measures of our economic health. So consider the number of non-farm jobs gained or lost, yes, but also assess the unemployment rate, the labor-force participation rate, and revisions to previous numbers. And for a richer picture, dig even deeper.
The next jobs report, for May, is due on June 7. Keep the above factors in mind, and you can make more sense of it.
Are you prepared for life after your working years?
Making the right financial decisions today makes a world of difference in your golden years, but with most people chronically under-saving for retirement, it's clear not enough is being done. Don't make the same mistakes as the masses. Learn about The Shocking Can't-Miss Truth About Your Retirement. It won't cost you a thing, but don't wait, because your free report won't be available forever.