The American economy picked up steam in
April, as employers added 288,000
jobs while the unemployment rate fell to 6.3 percent, the lowest level since
September 2008.
After a sharp
slowdown in job growth in December and January, and a modest improvement since
then, economists had been forecasting a healthy gain for April as consumer and
business activity rose in tandem with temperatures in many parts of the
country.
But the good news was
tempered by a drop of 806,000 in the number of Americans in the labor force, pushing the labor participation rate down sharply.
And despite the fall in joblessness, average hourly earnings were flat.
“The payroll numbers
suggest that the economy is recovering from a weather-induced showdown, said
Ethan Harris, co-head of global economics at Bank of America Merrill Lynch. But
“even with the drop in the unemployment rate,” he said, “we still have not
reached to point where workers have negotiating power.
That contradiction —
more employers finally beginning to hire workers at a more aggressive clip, but
little or no improvement in weekly paychecks for the 146 million Americans who
already have jobs — presents a challenge both for politicians and for policy
makers at the Federal Reserve.
The Fed has been
gradually stepping back from its stimulus efforts this year, a stand validated
somewhat by the fall in the unemployment rate, but the lack of wage growth
undermines claims by both the Fed and some elected officials that a resurgent
economy is at hand.
Nor is Washington
alone in trying to figure out this complicated picture. On Wall Street, where
signs of a turnaround in hiring might be expected to set off a rally, reaction
was muted in midday trading Friday. After initially jumping after the Labor
Department report, major indexes were almost unchanged for the day.
To be sure,
month-to-month swings in hiring are a snapshot of the economy, rather than a
portrait, and frequently blur.
For example,
government statisticians on Friday revised upward the number of jobs added in
February and March by a total of 36,000, suggesting the economy was stronger
than first assumed. And the April data could be significantly revised upward —
or downward — next month.
Still, the 288,000
figure for April was the best monthly increase since January 2012. And if those
kinds of labor market gains continue for the balance of 2014, it would be a
much-needed element of good news for President Obama and Democrats on Capitol
Hill, who have been apprehensive ahead of midterm elections in November.
At a Rose Garden news
conference Friday morning, Mr. Obama hailed the good economic news, crediting
the “grit and determination of the American people” for moving the country
forward economically.
But he also warned
that the good news could be fleeting without a “relentless” pursuit of policies
that will create more jobs and opportunities. He urged Congress to increase the
minimum wage — a move that Senate Republicans blocked this week with a
filibuster — and to invest in infrastructure.
“There’s plenty more
that Congress should be doing,” Mr. Obama said.
Many private-sector
economists said they were pleasantly surprised by the size of the payroll gain
last month. “It’s as good as I could have expected,” said Ian Shepherdson, the
chief economist at Pantheon Macroeconomics. “It was either a post-winter
catch-up, or the start of a stronger trend. There’s no way to know yet, but I’m
happy either way.”
More telling than any
one month’s change is the average monthly gain in payrolls over the last year,
which now stands at 197,000. So April’s data show a significant improvement
over the longer-term average.
The consensus among
economists polled by Bloomberg before the Labor Department’s announcement
Friday morning called for an increase of 218,000 in nonfarm payrolls, with the
unemployment rate falling by a tenth of a percentage point, to 6.6 percent.
The monthly Labor
Department report is based on two separate surveys, one of households, the
other of establishments, including government agencies, and private-sector
businesses like factories, offices and retail stores.
The establishment
survey provides the monthly estimate for payroll changes, and is favored by
economists and professional investors, while the unemployment rate is derived
from the more volatile survey of households. Although the two measures tend to
correspond over time, month-to-month variations can be wide.
For example, the
April survey of about 60,000 households indicated that 73,000 Americans lost
work last month, versus the gain of 288,000 in the establishment survey.
While the contrast
between a seeming surge in hiring by employers and a sharp drop in the size of
the work force set off a fierce debate Friday about just what to read into the
Labor Department data, Mr. Shepherdson insisted the payrolls number was the
most credible.
“The household survey
is insanely volatile,” he said, noting that in past months, the labor
participation rate had been growing, with sizable gains in the work force. “It
leads people down the garden path regularly.”
As for wages
remaining flat despite a healthier labor market, “this is very definitely a
puzzle,” Mr. Shepherdson said. “You would expect to see some evidence of a
shift as the unemployment rate goes down.”
At 6.3 percent, the
unemployment rate is down sharply from the peak of 10 percent in October 2009,
in the aftermath of the recession. But it is still above the historical average
for this stage of an economic recovery, and masks pockets of significant
joblessness among blacks, teenagers and workers with a high school degree or
less.
Strong sectors of
growth last month included construction, which gained 32,000 jobs and retail,
which added 35,000 jobs. Professional and business services, an area of the
economy that is closely watched as a barometer for broader white-collar
activity, added 75,000 positions.
The health care
sector, which showed strength in an otherwise disappointing report on
first-quarter economic conditions from the Commerce Department on Wednesday,
added nearly 28,000 jobs in April. Since the start of 2014, the sector has
added roughly 83,000 jobs, and many economists expect hospitals and medical
offices to keep hiring amid increased demand from new patients with the rollout
of the Affordable Care Act.
Of the 288,000
increase in payrolls, 273,000 came in the private sector, with government
adding 15,000 positions.
On Wednesday, Federal
Reserve officials said that they were seeing an increase in economic activity,
and would continue to gradually reduce monthly bond purchases aimed at
stimulating the economy.
The
better-than-expected jobs report Friday comes in the wake of other encouraging
economic yardsticks. For example, a survey of hiring among private employers in
April, released by ADP on Wednesday, showed the best monthly increase since
November. In addition, the latest report on the Institute for Supply
Management’s index of factory activity, announced Thursday, also showed an
increase in output.
Report Shows Resurgence of Hiring but Has Downbeat Notes
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