The April jobs report has a few good and bad items. The economy added 164,000 jobs, which sounds great, but below the 175,000 – 190,000 forecasters predicted.
The biggest news? The U.S. unemployment rate is at 3.9%. This is the first time the unemployment rate is below 4% since 2000.
Factory jobs went up in April as “[M]anufacturing firms added 24,000 workers to payrolls.” This means the country has “added 245,000 manufacturing jobs over the last year.” Health care added 24,000 jobs and mining added 8,000 jobs in April.
From Bloomberg:
The results may also reinforce forecasts for a rebound in economic growth this quarter after a slowdown in the first three months of the year, with the labor market supporting gains in consumer spending that may be further fueled by tax cuts. Companies in industries from services to manufacturing are hungry for workers, indicating hiring is likely to stay solid.“Overall, it’s a good report,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. “Slack is getting absorbed” but “the process of that translating into faster wages has been slow. Wages are clearly the one disappointing part of the report.”
The Labor Department also revealed that unemployment for blacks hit a record low at 6.6%. Unemployment for Hispanics tied a record low of 4.4%.
The Wall Street Journal reported that economists believe that the unemployment rate will likely continue to fall:
The fall was driven in part by the decline in the labor force participation rate, a which some economists worry could signal that people are feeling less optimistic about job prospects. Still, economists expect the unemployment rate will decline further in the months ahead–with the Fed forecasting a 3.6% rate next year–as the labor market continues to tighten.
Unemployment hasn’t been below 3.6% since the 1960s!
Despite all this, wage growth has grown little:
Average hourly earnings rose four cents in April to $26.84, a 0.15% increase from the prior month. On a year-over-year basis, wages grew 2.6%, below the 2.7% rate economists had forecast.The sluggish pace of wage growth should temper fears that an increasingly tight labor market–with the unemployment rate falling to 3.9% in April–is putting too much upward pressure on inflation.
Scott Brown, chief economist for Raymond James, told The Wall Street Journal that it “is a bit of a puzzle” trying to figure out the “disconnect between wages and unemployment.” WSJ continued:
Mr. Brown said several factors are likely keeping a lid on wage growth, from a decline in unions over the last several decades to some employers opting to offer perks such as signing bonuses rather than raise workers’ annual compensation.Others suggested the proliferation of so-called gig economy jobs through services like car-hailing app Uber and house-rental service Airbnb have also played a factor.”I don’t think inflation is really going to be much of a problem from here,” Brown added.
Politico reported that “economists continue to forecast stronger growth later this year as the labor market tightens.” A faster wage growth could possibly encourage the Federal Reserve “to move faster to raise interest rates.”
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