The pace we've come to expect

FOR the second month in a row, America’s labour market has disappointed, once again raising questions about whether the economic recovery is truly entrenched. Nonfarm payrolls rose just 115,000 in April from March. While the unemployment rate dipped to 8.1%, the lowest since early 2009, from 8.2%, it did so for the wrong reason: the labour force (those working or looking for work) shrank by 342,000.

Private payrolls rose 130,000, but government payrolls shrank, something of a setback because the state and local government austerity that had created such a drag in the past two years had shown signs of easing this year. However, manufacturing payrolls did rise again, suggesting that the industrial sector, and exports in particular, remain a bright spot. Retail employment also recovered, suggesting the recent rise in petrol prices to around $4 a gallon has yet to take a big bite out of the consumer.

One of the most troubling aspects of this report is that the shrinkage of the labour force means that just 63.6% of working-age adults are now actively engaged in work or looking for work. That's the lowest participation rate in decades. Part of this may be discouraged workers giving up the job hunt; the so-called "underemployment rate", or U-6 rate to data wonks, held steady at 14.5% in April. But this rate has actually fallen faster than the overall unemployment rate since September, so the story here is more fundamental than lousy job prospects: it's a troubling sign of the slowing potential growth of the economy. Read more.....