NFP 223K, US Unemployment Falls to Lowest Level Since 2008
U.S. job growth rebounded last month and the unemployment rate dropped to a near seven-year low of 5.4 percent, signs of a pick-up in economic momentum that could keep the Federal Reserve on track to hike interest rates this year.
Nonfarm payrolls increased 223,000 as gains in services sector jobs offset weakness in mining, the Labor Department said on Friday. The one-tenth of a percentage point decline in the unemployment rate to its lowest level since May 2008 came even as more people piled into the labor market.
But March payrolls were revised to show only 85,000 jobs created, the smallest since June 2012. That resulted in 39,000 fewer jobs added in February and March than previously reported.
Still, the employment report, which showed steady gains in hourly earnings, suggested underlying strength in the economy at the start of the second quarter after growth almost braked to a halt in the first three months of the year.
The economy wobbled in the first quarter and may have even contracted as it was buffeted by bad weather, port disruptions, a strong dollar and deep spending cuts by energy firms.
“We may see a further acceleration in employment growth going into the summer, but this isn’t the sort of unequivocal rebound that would give the Fed the confidence to begin tightening monetary policy before independence day,” said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto, referring to the July 4 holiday.
The dollar erased earlier losses and rose against a basket of currencies on the report, while prices for U.S. Treasury debt rose. U.S. stock index futures extended gains.
The Fed is likely to hold off tightening monetary policy for at least a few more months given the headwinds to growth from the dollar and spending cuts in the energy sector, and a desire among officials to get a firmer fix on the economy’s trajectory.
The U.S. central bank has kept overnight interest rates near zero since December 2008.
The drop in the unemployment rate pushed it within a whisker or two of the 5.0 percent to 5.2 percent range that most Fed officials consider consistent with full employment.
Even more encouraging, the labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, rose 0.1 percentage point to 62.8 percent last month. Other measures on the Fed’s so-called dashboard also improved further.
A broad measure of joblessness that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment fell to 10.8 percent – the lowest level since August 2008, from 10.9 percent in March.
The number of long-term unemployed continued to fall. Average hourly earnings rose three cents in April, which took the year-on-year gain to 2.2 percent.
While still tepid, the wage increases are a boost for consumer spending, which bodes well for the broader economy.
Last month, the government said the economy expanded by only a 0.2 percent annual rate in the first quarter, but a report earlier this week showing a wider-than-forecast trade deficit suggests GDP actually shrank.
There was a broad-based acceleration in job growth in April, with the exception of the mining sector, where a plunge in crude oil prices has undercut energy production.
Schlumberger (SLB.N), the world’s No.1 oil-field services provider, said last month it would cut a further 11,000 jobs, bringing total layoffs this year to 20,000. Baker Hughes (BHI.N) and Halliburton (HAL.N) have also announced thousands of redundancies.
Mining payrolls fell 15,000, logging the fourth straight month of declines. Manufacturing employment increased 1,000 after being flat in March as factories struggle with a strong dollar. Construction payrolls jumped 45,000 after falling 9,000 in March.
Private services employment rose 182,000 and government payrolls increased 10,000.