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 Nonfarm payrolls increased 223,000 as gains in services sector and
construction jobs offset weakness in mining, the Labor Department
said on Friday. The one-tenth of a percentage point decline in the
unemployment rate to its lowest level since May 2008 came even as
more people piled into the labor market.
However, wage growth was tepid and March payrolls were revised
downward, leading financial markets to push back rate hike bets.
"We see this report as reducing concerns that weak first-quarter
growth represents a loss of economic momentum," said Michael Gapen,
chief U.S. economist at Barclays in New York.
Nevertheless, he said the bounce back was not strong enough to think
the Fed could bump rates higher before September.
March payrolls were revised to show only 85,000 jobs created, the
fewest since June 2012. That resulted in 39,000 fewer jobs added in
February and March than previously reported, underscoring the
weakness in activity at the start of the year.
Investors on Wall Street cheered the report. U.S. stocks ended the
session more than 1 percent higher.
Yields on U.S. Treasury debt dropped and futures contracts showed
traders clinging to bets the U.S. central bank would raise rates
from near zero this year.
The dollar rose marginally against a basket of currencies.
Employment growth averaged 257,000 per month in the 12 months prior
to April.
LABOR MARKET TIGHTENING
The drop in the unemployment rate pushed it within a whisker or two
of the 5.0 percent to 5.2 percent range that most Fed officials
consider consistent with full employment.
Some economists said the diminishing labor market slack could push
Fed officials to tighten monetary policy despite anemic wage growth.
"Even without wages or inflation picking up, we do not think the Fed
will feel comfortable sitting at zero as the unemployment rate
closes in on 5 percent," said Michelle Girard, chief economist at
RBS in Stamford, Connecticut.
Also encouraging, the labor force participation rate, or the share
of working-age Americans who are employed or at least looking for a
job, rose 0.1 percentage point to 62.8 percent, although that was
just up from a 36-year low.
Other measures on the Fed's so-called dashboard also improved
further.
A broad measure of joblessness that includes people who want to work
but have given up searching and those working part-time because they
cannot find full-time employment fell to 10.8 percent - the lowest
level since August 2008.
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In addition, the number of long-term unemployed continued to fall,
touching its lowest level since late 2008. Though there was a rise
in part-time workers, the trend remained in favor of full-time
employment.
Wages, however, were a weak spot. Average hourly earnings rose just
three cents in April. While that took the year-on-year gain to 2.2
percent, it stayed in the range it has been in for the past few
years.
The sluggishness in average hourly earnings is in stark contrast
with other compensation measures that have suggested solid wage
growth in recent months.
"With the unemployment rate approaching full-employment levels it
will only be a matter of time before wages start to rise at a
somewhat swifter pace," said Scott Anderson, chief economist at Bank
of the West in San Francisco.
Last month, the government reported that the economy expanded at
only a 0.2 percent annual rate in the first quarter, but data
earlier this week showing a wider-than-forecast trade deficit
suggests GDP actually shrank.
There was a broad-based acceleration in job growth in April, with
the exception of the mining sector, where a plunge in crude oil
prices has undercut energy production.
Schlumberger, the world's No.1 oil-field services provider, said
last month it would cut a further 11,000 jobs, bringing total
layoffs this year to 20,000. Baker Hughes and Halliburton have also
announced thousands of redundancies.
Mining payrolls fell 15,000, logging the fourth straight month of
declines. Oil and gas extraction recorded the biggest jobs decline
since September 1992.
Manufacturing employment increased 1,000 after being flat in March
as factories struggle with a strong dollar, which has gained 12
percent against currencies of the United States' main trading
partners since June. Construction payrolls jumped 45,000 after
falling 9,000 in March.
Private services employment rose 182,000 and government payrolls
increased 10,000.
The workweek held steady at 34.5 hours.
(Reporting by Lucia Mutikani; Editing by Andrea Ricci and Tim
Ahmann)
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