United States: Unemployment rate eases to lowest level in a decade in April
May 5, 2017
Employment growth in the U.S. labor market regained traction in April. Non-farm payrolls rose by 211,000 jobs in the month, slightly above market expectations of 190,000 additional jobs. The reading marked a considerable improvement over March’s meager print, when employers added, according to revised figures, 79,000 jobs (previously reported: +98,000). April’s labor report suggests that early signs of slack in the U.S. economy in Q1 have been, as argued by the Federal Reserve in its 2-3 May meeting statement, no more than transitory.
April’s report shows that, although job creation continues to be driven mostly by the private sector, the public administration is starting to pull its weight, adding a seven-month high of 17,000 jobs in the month. Among the 194,000 jobs added by the private sector, services was a major player. A breakdown of the print shows that leisure and hospitality added 55,000 jobs while 37,000 more were added in health care and social assistance. Financial activities created an additional 19,000 jobs. Unemployment in mining and manufacturing, sectors that are closely monitored by the Trump administration, posted limited gains in April.
The unemployment rate continued to drop in April, extending a downward trend that has seen the rate ease from 4.8% in January to 4.4% in April. March’s report had seen the rate at 4.5%. The figure in April marks the lowest reading since May 2007 and spells good news for U.S. households. Somewhat interestingly, however, is the lack of a pickup in hourly earnings, which have hovered around the 2.5% level—in year-on-year terms—for months despite the ongoing tightening of the market. The workforce was largely unchanged in April at 62.9%.
The Federal Reserve will welcome the robust pace of job creation and the dip in the unemployment rate to 4.4%, which is now below its long-term target. Consistent with its statement in early May, upbeat labor data leaves the Fed on track to hike interest rates at the next June meeting, a view increasingly shared by our panel.
Author: David Ampudia, Economist