U.S. job growth rebounds
sharply, unemployment rate falls to 4.4 percent
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[May 06, 2017]
By Lucia Mutikani
WASHINGTON (Reuters) - U.S. job growth
rebounded sharply in April and the unemployment rate dropped to 4.4
percent, near a 10-year low, pointing to a tightening labor market that
likely seals the case for an interest rate increase next month despite
moderate wage growth.
Nonfarm payrolls surged by 211,000 jobs last month after a paltry gain
of 79,000 in March, the Labor Department said on Friday. April's job
growth, which was broad-based, surpassed this year's monthly average of
There were hefty increases in leisure and hospitality, healthcare and
social assistance as well as business and professional services
The drop of one-tenth of a percentage point in the jobless rate took it
to its lowest level since May 2007 and well below the most recent
Federal Reserve median forecast for full employment.
"These developments should keep the Fed firmly on track to hike rates
again in June and should motivate a hawkish shift in the interest rate
forecasts they will release at that meeting," said Michael Feroli, an
economist at JPMorgan in New York.
The hiring rebound supports the U.S. central bank's contention that the
pedestrian 0.7 percent annualized economic growth pace in the first
quarter was likely "transitory," and its optimism that economic activity
would expand at a "moderate" pace.
The Fed on Wednesday kept its benchmark overnight interest rate
unchanged and said it expected labor market conditions would "strengthen
somewhat further." It raised rates by a quarter of a percentage point in
March and has forecast two more increases this year.
Financial markets are pricing in a roughly 83 percent probability of a
25-basis-point rate increase at the Fed's June 13-14 policy meeting,
according to CME Group's FedWatch program.
Prices of benchmark U.S. Treasuries rose modestly on Friday, while U.S.
stocks closed higher, with the S&P 500 <.SPX> ending at a record high
close. The dollar <.DXY> fell marginally against a basket of currencies
as investors turned their attention to the second round of France's
presidential election on Sunday.
WAGE GROWTH LAGS
The U.S. economy needs to create 75,000 to 100,000 jobs per month to
keep up with growth in the working-age population.
Republican President Donald Trump, who inherited a strong job market
from the Obama administration, has vowed to sharply boost economic
growth and further strengthen the labor market by slashing taxes and
Trump later hailed the numbers in a tweet: "Great jobs report today - It
is all beginning to work!"
In April, average hourly earnings rose 7 cents, or 0.3 percent. However,
downward revisions to previous months lowered the year-on-year increase
to 2.5 percent, the smallest gain since August 2016, from 2.6 percent in
[to top of second column]
A job seeker fills out an application at the King Soopers grocery
store table at a job fair at the Denver Workforce Center in Denver,
Colorado, U.S. February 15, 2017. REUTERS/Rick Wilking
But there are signs wage growth is accelerating as labor market slack
diminishes. A government report last week showed private-sector wages recorded
their biggest gain in 10 years in the first quarter.
With the labor market expected to hit a level consistent with full employment
this year, payroll gains could slow amid growing anecdotal evidence that firms
are struggling to find qualified workers. That could also boost wages.
"While there is still some labor market slack, it is diminishing rapidly. This
is likely to put upward pressure on wages," said David Berson, chief economist
at Nationwide Insurance in Columbus, Ohio.
A broad measure of unemployment, which includes people whowant to work but have
given up searching and those workingpart-time because they cannot find full-time
employment, dropped three-tenths of a percentage point to 8.6 percent, the
lowest level since November 2007.
The employment-to-population ratio rose one-tenth of percentage point to an
eight-year high of 60.2 percent. This measure has risen for four straight
The labor force participation rate, or the share of working-age Americans who
are employed or at least looking for a job, fell to 62.9 percent from an
11-month high of 63 percent in March. It has rebounded from a multi-decade low
of 62.4 percent in September 2015, and economists see limited room for further
improvement as the pool of discouraged workers shrinks.
Construction payrolls rose by 5,000 last month and manufacturing payrolls
increased by 6,000. Leisure and hospitality payrolls jumped by 55,000 in April.
Professional and business services payrolls rose by 39,000. Healthcare and
social assistance employment increased by 36,800.
Retail payrolls gained 6,300 after two straight months of declines. Retailers
including J.C. Penney Co Inc <JCP.N>, Macy's Inc <M.N> and Abercrombie & Fitch
<ANF.N> have announced thousands of layoffs as they shift toward online sales
and scale back on brick-and-mortar operations.
Government payrolls jumped by 17,000 last month as an increase in hiring by
local governments offset a decline in federal government employment.
(Reporting by Lucia Mutikani; Editing by Paul Simao and Leslie Adler)
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