Hiring in U.S. Kicks Into Higher Gear as Unemployment Plunges to 6.3%
America’s job-creation machine kicked into higher gear in April as employers boosted payrolls by the most in two years and the jobless rate plunged to the lowest since the collapse of Lehman Brothers.
The 288,000 gain in employment marked the biggest upside surprise since February 2012 and followed a 203,000 increase the prior month, Labor Department figures showed today in Washington. Unemployment dropped to 6.3 percent, the lowest level since September 2008.
“The economy is gathering momentum after the bad winter,” said Michael Gapen, senior U.S. economist at Barclays Plc in New York, whose firm’s projection of 250,000 was among the closest in the Bloomberg survey. “It’s a very balanced number in the sense that we got it in goods as well as services.”
The report was not without pockets of weakness as wages stagnated and workforce participation matched a 36-year low. Nonetheless, job growth was broad-based and the hiring pace accelerated at factories, builders and service providers after households spent more freely as the first quarter drew to a close, showing the economy is perking up.
Stocks fell, after an earlier rally that sent the Standard & Poor’s 500 Index above its closing record, as concern about escalating tension in Ukraine overshadowed the jobs report. The S&P 500 fell 0.1 percent to 1,881.14 at the close in New York. The yield on the benchmark 10-year Treasury note fell to 2.59 percent from 2.61 percent late yesterday.
The jobs figures corroborate the Federal Reserve’s view that the economy is rebounding from the weakest growth rate in a year, indicating central bankers will keep trimming stimulus.
“The soft patch is over, and the strong U.S. recovery will continue,” said Laura Eaton, an economist at Fathom Financial Consulting in London, whose firm’s projection of 250,000 jobs added was among the closest in the Bloomberg survey.
The median forecast in a Bloomberg survey of 94 economists called for a 218,000 advance. Forecasts for April payrolls ranged from increases of 155,000 to 292,000.
The difference between today’s outcome on payrolls and the average estimate of economists was 3.56 times larger than the poll’s standard deviation, or the average divergence between what each economist forecast and the mean.
Last year, the U.S. added more than 194,000 jobs each month, compared with about 186,000 in 2012. Economists surveyed by Bloomberg on April 4-9 project payroll gains to match 2013.
Today’s report showed construction payrolls increased 32,000 in April, the biggest gain in three months, while retailers added 34,500 workers, the most this year.
Private service-producing employment increased 220,000 last month, the strongest gain in 11 months and fueled by more hiring at temporary-help companies and education and health services.
Private payrolls, which don’t include government agencies, increased 273,000 in April after a 202,000 gain. Last month, hiring by companies surpassed the pre-recession peak for the first time.
Americans are the most upbeat about finding a “quality job” than at any time since January 2008, according to Gallup data released April 25. A recent report from the Conference Board showed the proportion of consumers who said jobs would become more plentiful in the next six months climbed in April to the highest level since January.
As a human resources specialist, Alan Janzen has first-hand knowledge of the improvement in the labor market. He started a job this week with the city of San Antonio after working as a personal trainer. He sent out 27 applications since beginning his job hunt in February.
“I expected it to be a long and frustrating search, from everything I hear,” said Janzen, 31, who has a master’s degree in human resources.
Such optimism extends to Ford Motor Co. (F) Boosted by record profits in North America, the second-largest automaker said it will probably hire more than the 12,000 new workers it promised in its 2011 contract with the United Auto Workers.
“The business has grown faster than we predicted it would in 2011,” Joe Hinrichs, Ford’s president of the Americas, said in an interview on April 30. The company said it hired 2,000 new workers at its factory in Claycomo, Missouri, and that it’s completed about 75 percent of its commitment to hire 12,000 workers by 2015.
One cloud in today’s figures is worker pay, which is stagnating. Average hourly earnings held at $24.31 in April, and were up 1.9 percent over the past 12 months, the smallest gain this year.
The drop in the unemployment rate from March’s 6.7 percent came as the agency’s survey of households showed the labor force shrank by more the 800,000 in April. The participation rate, which indicates the share of working-age people in the labor force, decreased to 62.8 percent, matching the lowest level since March 1978, from 63.2 percent a month earlier.
Reconciling such data, in the context of stronger employment gains, presents a challenge to Fed policy makers as they try to determine when to begin raising interest rates. Central bankers at this week’s meeting said the economy is showing signs of picking up and the job market is improving. The Fed’s Open Market Committee pared its monthly asset-buying to $45 billion, its fourth straight $10 billion cut, and said further reductions in “measured steps” are likely.
“Yellen’s dashboard still looks abysmal in today’s data, with labor force participation falling, long-term unemployment still stubbornly high -- and could be improving for the wrong reasons -- and those working part-time instead of full-time for economic reasons unchanged,” said Diane Swonk Chief Economist at Chicago-based Mesirow Financial Inc. “Wage pressures remain nonexistent, further testimony that her dashboard of labor market slack is accurate.”
Gross domestic product rose at a 0.1 percent annualized rate from January through March, compared with a 2.6 percent gain in the prior quarter, the Commerce Department said earlier this week.
“Growth in economic activity has picked up recently, after having slowed sharply,” the Fed said this week in a statement following their meeting in Washington. “Household spending appears to be rising more quickly.”
Household purchases, which account for about 70 percent of the economy, climbed 0.9 percent in March, the most since August 2009, the Commerce Department said yesterday. Incomes increased by the most in seven months.
Today’s report “completely justifies the Fed’s statement this week that there is an improved assessment, things are looking better,” said Lindsey Piegza, the Chicago-based chief economist at Sterne Agee & Leach Inc. “This sets the Fed up for taking baby steps.”
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