The Labor Department’s closely watched employment report on Friday also
showed wages barely rose last month, which could ease concerns that inflation
pressures are rapidly building up, likely keeping the Federal Reserve on a
gradual path of monetary policy tightening.
Nonfarm payrolls increased by 164,000 jobs last month, the Labor
Department said on Friday. Data for March was revised up to show payrolls
rising by 135,000 jobs instead of the previously reported 103,000.
That was still the fewest amount of jobs created in six months and
followed an outsized gain of 324,000 in February.
While cold weather in March and April probably held back job growth,
hiring is moderating as the labor market hits full employment. There has been
an increase in reports of employers, especially in the construction and
manufacturing sectors, struggling to find qualified workers.
The drop of two-tenths of a percentage point in the unemployment rate
from 4.1 percent in March pushed it to a level last seen in December 2000 and
within striking distance of the Fed’s forecast of 3.8 percent by the end of
this year. It was the first time in six months that the jobless rate dropped.
But 236,000 people left the labor force in April. The labor force
participation rate, or the proportion of working-age Americans who have a job
or are looking for one, fell to 62.8 percent last month from 62.9 percent in
March.
Economists polled by Reuters had forecast payrolls rising by 192,000
jobs in April and the unemployment rate falling to 4.0 percent.
Longer-dated U.S. Treasury yields fell after the data. The dollar pared
losses against a basket of currencies and U.S. stock index futures trimmed
losses.
SLUGGISH WAGE GROWTH
Average hourly earnings rose four cents, or 0.1 percent, last month
after gaining 0.2 percent in March. That left the annual increase in average
hourly earnings at 2.6 percent.
The average workweek was unchanged at 34.5 hours last month.
While average hourly earnings have suggested only a gradual increase in
wage inflation, other measures have been more robust. The Employment Cost Index
(ECI), widely viewed by policymakers and economists as one of the better
measures of labor market slack, increased solidly in the first quarter.
The ECI report showed wages rising at their fastest pace in 11 years
during the period.
Even with the annual increase in average hourly earnings still moderate,
inflation is flirting with the Fed’s 2 percent target.
The Fed’s preferred inflation measure, the personal consumption
expenditures price index excluding food and energy, was up 1.9 percent
year-on-year in March after a 1.6 percent rise in February.
The U.S. central bank on Wednesday left interest rates unchanged and
said it expected annual inflation to run close to its “symmetric” 2 percent
target over the medium term.
Economists interpreted symmetric to mean policymakers would not be too
concerned with inflation overshooting the target. The Fed hiked rates in March
and has forecast at least two more increases for this year.
Economists expect the unemployment rate will drop to 3.5 percent by the
end of the year. Though the decline in the labor force accounted for the drop
in the unemployment rate last month, labor market slack is diminishing. That,
together with a shortage of skilled workers, should put upward pressure on
wages in the months ahead, economists say.
A broader measure of unemployment, which includes people who want to
work but have given up searching and those working part-time because they
cannot find full-time employment, dropped to 7.8 percent last month, the lowest
level since July 2001, from 8.0 percent in March.
The economy needs to create roughly 120,000 jobs per month to keep up
with growth in the working-age population. Employment gains have averaged
199,750 jobs per month this year.
Construction payrolls rebounded by 17,000 jobs last month after
recording their first drop in eight months in March. Manufacturing employment
increased by 24,000 jobs in April after a gain of 22,000 positions in March.
The retail sector added 1,800 jobs. Payrolls for temporary help, seen as
a harbinger of future permanent hiring, rose by 10,300 after falling by 2,100
in March. Leisure and hospitality employers added 18,000 jobs last month.
Government payrolls fell 4,000 in April amid a decline in education
employment at state governments.
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