The pace of hiring picked up
again in April and the unemployment rate fell to the lowest level in nearly a
decade, evidence the U.S. economy is poised for a spring rebound after a
lackluster start to the year.
Nonfarm payrolls rose by a
seasonally adjusted 211,000 in April from the prior month, the Labor
Department said Friday. The unemployment rate for April edged down to 4.4% from
the prior month’s 4.5% reading.
The unemployment rate hasn’t been
this low since May 2007 and that matched the lowest rate of any point during
the prior expansion.
Monthly payroll growth has
averaged 185,000 so far this year, nearly matching its pace of growth in 2016.
“This is an unambiguously strong
economic report and suggests that consumers will have the wherewithal to
increase spending in the second quarter,” said David Berson, economist at
Nationwide Mutual Insurance Co.
The low jobless rate means the
Federal Reserve is likely to raise its benchmark short-term interest rate when
officials next gather in June, and then again likely in September, and that the
Fed could start winding down its bond portfolio later this year.
A low rate tends to mean upward
pressure is building on wages and inflation. Still, it comes with a caveat: A
smaller share of Americans are participating in the labor force this year,
compared with a decade ago, partly a result of retiring baby boomers.
The economy has added better than
200,000 jobs in three of the past four months. The exception was March.
Employers added a downwardly revised 79,000 jobs that month, compared with an
initial estimate of a 98,000 increase.
Strong hiring supports the
projection that economic growth is accelerating this spring. Many
economic forecasters expect the annual growth rate in gross domestic product to
accelerate to better than 3% for the April through June period, from the modest
0.7% pace of the first quarter. The Federal Reserve and other economists
project overall growth in 2017 to settle near 2%, its pace for most of this
Average hourly earnings for
private-sector workers rose 2.5% in April compared with a year earlier. Annual
wage gains firmed most of last year, reflecting increased competition for
workers. But the pace of raises slowed since December’s 2.9% increase, the
strongest gain since June 2009.
That softening of wage growth
could prove temporary, if employers start to struggle to find qualified
“The labor market is very tight
and increases the chance of an acceleration in wage inflation in the near
term,” said Mickey Levy, economist at Berenberg Capital Markets.
The U.S. labor market has been
one of the brightest spots in a long recovery marked by slow economic growth.
Payrolls this year have expanded similarly to the strong rate recorded since
2011. Those gains have come despite historically soft economic growth of near a
2% annual rate.
To support better economic
growth, especially when productivity gains have been weak, employers need to
draw more workers into the labor force.
That could become a challenge
because the share of Americans working or seeking work has generally declined
the past 15 years, in part reflecting the aging of the U.S. population.
The labor-force participation
rate in April ticked down to 62.9% from 63% in March. The rate has mostly
steadied over the past year, which could reflect, at a minimum, a slower flow
of workers leaving the labor force.
An alternative measure of
unemployment and underemployment, which includes those who have stopped looking
and those in part-time jobs who want full-time positions, was 8.6% in April,
versus 8.9% the prior month. It was the lowest level since late 2007.
The rate, designated U-6,
averaged 8.3% in the two years before the recession.
April job gains were fairly
broad-based with strong hiring in professional and business services, health
care and leisure and hospitality.
Retailers added jobs in April
after two monthly declines. Employment at all levels of government rose by
More broadly, the U.S. labor
market has added jobs every month since October 2010, a long stretch that has
slowly repaired much of the damage from the Great Recession and allowed the Fed
to start raising short-term interest rates from near zero.
Central-bank officials this week
held short-term interest rates steady, but indicated two more increases could
occur later this year.
“The labor market has continued
to strengthen even as growth in economic activity slowed,” Fed officials said
in their post-meeting statement.
A low unemployment rate could
give the central bank leeway to tighten monetary policy further.
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