Advertisement

U.S. employers add solid 223K jobs; un­em­ploy­ment rate drops to 5.4 percent

 
In this April 22, 2015 photo, a sign at a recruiting station for Leslie's Pool supplies boasts that it is a great place to work during a National Career Fairs job fair, in Chicago. The Labor Department released employment data for April on Friday. [Associated Press]
In this April 22, 2015 photo, a sign at a recruiting station for Leslie's Pool supplies boasts that it is a great place to work during a National Career Fairs job fair, in Chicago. The Labor Department released employment data for April on Friday. [Associated Press]
Published May 9, 2015

The U.S. job market rebounded in April, the government said Friday, helping to ease worries that the economy was on the brink of another extended slowdown after a bleak winter in which the overall economy stalled. But the growth in jobs failed to translate, once again, into any significant improvement in pay.

Employers added 223,000 positions last month, the Labor Department reported, and the unemployment rate decreased to 5.4 percent, a turnaround from the disappointing performance in March, initially reported as a modest 126,000 gain and then revised down on Friday to 85,000.

"We expected a rebound following the numbers in March and we got it, but not much more," said Guy Berger, U.S. economist at RBS. "Wage growth is still the missing piece."

Indeed, before Friday's report, some economists were estimating that average hourly earnings might rise 0.2 percent or more in April, signaling an upswing from the slow pace of wage gains since the end of the recession.

But average hourly earnings rose only 0.1 percent in April, producing a 2.2 percent annual gain. That modest showing suggests that any meaningful wage gains for most workers are still delayed, despite the steadily falling unemployment rate.

The absence of wage pressure suggests that the Federal Reserve will not be in a rush to take its long-awaited first step in raising short-term interest rates, which have been near zero since late 2008.

Many experts once expected the Fed to move in June, but the consensus has recently shifted to September or beyond as the probable beginning of any gradual tightening effort by the central bank.

"All things considered, any lingering possibility of a June rate hike from the Fed is now off the table, with September probably the most likely liftoff date now," said Paul Ashworth, chief U.S. economist for Capital Economics, a research firm.

Berger agreed that if monthly job gains could be sustained at this pace, the Fed would most likely act at its September meeting.

"If we get numbers like this or even a little bit softer for the next five months, the Fed will probably feel comfortable raising rates in September," Berger said. "Wage growth isn't a precondition to raising rates, but they want some confidence that it is on the way."

At 5.4 percent, the unemployment rate now is at its lowest point since the spring of 2008, and is down sharply from the 8 percent level at the beginning of 2013.

If employment and the labor force continue to gain steam at the pace they have maintained over the last 12 months, the unemployment rate should drop to 4.9 percent by the end of 2015. That would bring the country's official level of joblessness to within shouting distance of where it was a decade ago, before the housing boom went bust and the financial crisis hit in 2008.

Another important indicator of overall labor market health is the participation rate, which has been stuck near multidecade lows for years, despite healthy hiring in 2015. Last month, it increased 0.1 percentage point to 62.8 percent.

Conservative critics of President Barack Obama's economic policies cite the depressed participation rate as evidence of how weak the economy remains, despite other seemingly rosy data points like the falling unemployment rate, healthy corporate profits and a buoyant stock market.

Other experts attribute much of the decline to the retirement of baby boomers, the return of some adults to school and other demographic factors.

Fed policymakers have suggested that both economic and demographic forces are at work, and they too are closely watching the participation rate. Before letting interest raise rise to a level in line with historic norms, they want to see evidence that labor market slack is finally receding, nearly seven years after the collapse of Lehman Bros. turned what had been a mild recession into an economic rout.

Despite the jump in hiring in April, there are indications of a feast-or-famine job market, with some sectors vastly outperforming others.

Construction has been gaining steam, thanks to a reasonably healthy housing sector and a spring rebound in hiring after very wintry weather in many parts of the country forced some building projects to be delayed. Builders hired 45,000 workers last month.

Similarly, the professional and business services category has been strong, adding 62,000 jobs in April, reflecting financial sector strength and continued demand for college-educated, white-collar workers. Health care was another source of gains, adding 55,600 positions. In just the last three months, the health care sector has gained nearly 125,000 jobs.

On the other hand, with oil prices way down from where they were a year ago, drillers and other oil patch employers have been shedding jobs.

Energy prices have ticked higher recently, as have gasoline costs, but energy companies including drillers and employers in the Labor Department's support for oil and gas operations category continued to shed workers, cutting more than 10,000 jobs in April.

Underscoring the uncertain picture, the government said in a separate report on Friday that wholesale inventories rose more slowly than expected in March. With businesses restocking shelves less aggressively, experts at Barclays and Macroeconomic Advisers revised their estimate for economic activity in the first quarter downward on Friday to show a contraction of 0.6 percent, even worse than the Commerce Department's initial estimate of a tiny 0.2 increase.