Jobless rate falls to 5.4% as economy regains footing

Boston (May 9)  The U.S. regained its solid hiring pace last month after a grim winter, according to government data released Friday, in a sign of labor market health that quieted concerns about a prolonged economic backslide.

Employers filled 223,000 new positions in April, many of them for higher-paying jobs, as the unemployment rate dropped to a seven-year low of 5.4 percent.

The latest numbers suggest that a recent economic slowdown — and a likely first quarter contraction — marks a temporary and partly weather-related slip rather than a sign of deeper problems. Both the jobs growth in April, as well as the tick down in the unemployment rate, was almost exactly in line market expectations.

Though the U.S.'s broader recovery remains well shy of full speed, the labor market has emerged as the best segment of the economy. In all but one of the last 14 months the nation has added at least 200,000 jobs, a period of hiring unmatched in 15 years.

"This was a good and important number," said Mark Luschini, a chief investment strategist for Janney Capital Management. "It suggests the underlying momentum in the economy is sufficiently strong," and that performance in the winter was "somewhat anomalous."

The pace of job growth indeed took a step back during the start of the year. And in March, it cratered, with only 85,000 positions created — the worst showing since June 2012. The March hiring number initially stood at 126,000, but was revised downward Friday.

Economists now say that the break in hiring was likely influenced by a West Coast port strike that choked off supply lines and by a severe winter that kept shoppers and construction crews indoors. In Friday's data, there was at least one clear sign of the hiring bounce-back: The construction industry added 45,000 jobs in April, its best mark in more than a year, after losing 9,000 in March.

Still, not all of the stresses on the economy will be short-lived as the winter. With the price of oil down some 40 percent from last summer, drilling companies have been forced to make major cutbacks and lay off thousands of workers. Meanwhile, a strong dollar is trimming exporters' profits and widening the trade deficit, a drag on growth.

In the first quarter of 2015, the U.S. economy expanded just 0.2 percent. The growth figure will be revised later this month, and many analysts say the new number could fall below zero, given a recent indication that the March trade deficit was even wider than expected.

The stronger dollar, coupled with weaker growth in China and Europe, has "made companies here just be a bit more cautious about what might transpire in 2015 and 2016," said Frank Friedman, the chief financial officer and global chief operating officer of Deloitte.

The April hiring number was important, though, because it offered the first insights about the second quarter. Markets welcomed the news Friday, with stocks jumping and the dollar rising against the euro.

Some U.S. officials point out that job growth, which several years ago leaned toward lower-paying jobs, has now spilled into traditional middle- and upper-class industries like construction, consulting and engineering. The sector known as "professional and business services" in April accounted for 62,000 new jobs, more than a quarter of all positions. Last year, the sector accounted for about 23 percent of all jobs.

"I do get frustrated from time to time at the misperception some people have that it's been a low-wage recovery," Department of Labor Secretary Thomas Perez said Friday in an interview. "That's just not accurate. These are well-paying jobs, by and large."

The latest data comes as the Federal Reserve is debating when to hike interest rates, which have stayed near zero for more than six years. Though the central bank has given few signals about its timing, most investors expect the Fed to hold off on any move until the economy shows signs that it has broken from its slowdown.

The numbers growth in April was "not too hot that it will force the Fed's hand in June, and not too cold that it pushes the first rate hike into 2016," Scott Anderson, a Bank of the West chief economist, said in an email.

One of the key barometers for determining the rate hike timing is wage growth, which has remained relatively tame even as the unemployment rate has fallen. The latest numbers Friday showed only modest wage increases, with average earnings up only 3 cents hourly from March. Over the last 12 months, average earnings have increased 2.2 percent, which is roughly in line with the trend during the six-year recovery from the Great Recession.

Economists have been awaiting signs that the United States is nearing full employment, a situation where enough people have jobs that employers must boost wages to compete for new workers. Though job growth was strong in April in the health care and construction sectors, there were again major losses in the mining industry — a result of lower oil prices that have forced cutbacks among American drillers and their suppliers. Another 15,000 mining jobs were lost in April; mining employment has declined by 49,000 since the year.

In April, the labor force participation rate — the share of people who hold jobs or are looking — ticked up slightly to 62.8 percent. Still, the number is near historical lows, and many analysts say a massive untapped workforce remains on the sidelines.

"I think we're quite far away from full employment, and I say that largely because I'd still like to see people come back into the labor force," said Tara Sinclair, chief economist at Indeed.com, a job search site. "We haven't seen a lot of movement in that direction."

Source: HamptonRoads