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US hiring rebounds; jobless rate hits seven-year low
[WASHINGTON] The US economy pumped out a solid 223,000 new jobs in April and unemployment ticked down to a seven-year low of 5.4 per cent, the Labor Department said Friday.
But the US labor market nevertheless showed some signs of weakness, with wages barely growing and underemployment still elevated.
The Labor Department's monthly jobs market report was roughly in line with expectations, reversing a dismal performance in March, when the number of jobs generated was just 85,000.
April's recovery demonstrated that the economy still shows muscle following the first-quarter stall, analysts said.
But, pointing to weak details behind the headline numbers, they said another strong month or two is needed to prove the winter slowdown was "transitory," echoing the view of the Federal Reserve late last month.
The jobs report was "much better than in March, but still not by enough to fully offset March's weakness," said Jim O'Sullivan of High Frequency Economics.
Details in the data showed only slight signs of tightening in the labor market, which is key to both confidence in the economy's strength and the Fed's plan to begin hiking interest rates this year.
The number of unemployed Americans was virtually unchanged from March at 8.5 million, as was the labour force participation rate, at 62.8 per cent, compared with above 66 per cent before the 2008-2009 recession.
Also barely changed was the number of people forced to accept part-time jobs, 6.6 million.
Meanwhile, average wages were up a mere 0.1 per cent in the month, and just 2.2 per cent from a year ago.
"More people are working, but they're not getting fatter paychecks," said Sal Guatieri of BMO Capital Markets.
END OF WINTER STALL?
March's plunge in job creation had analysts concerned, coming after a year in which job growth averaged 287,000 a month across the country.
It came at the end of a quarter when the economy stalled due to several factors: extremely harsh winter weather that locked down economic activity for weeks in some areas; the West Coast ports slowdown that severely hampered trade for more than three months; the strong dollar's hit on exports; and general global economic weakness.
The initial estimate for the January-March economic growth rate was just 0.2 per cent, and some analysts believe that will be revised to a negative number.
But with winter over and ports back to full operation, the second quarter should be better.
After its last policy meeting in late April, the Fed said it believed the first-quarter slump reflected "in part" such transitory factors.
Job gains last month were strongest in construction, health care, and professional and business services, while losses came in mining, particularly the oil and gas industry, where companies are cutting back sharply due to the oil price crash.
"The good news is that there is any job growth at all, given the rapidity with which the air has come out of the oil economy," said Chris Low of FTN Financial.
"But we also see a healthy rebound in construction despite weakness in oil states. In other words, outside of the oil sector, the economy remains vibrant." If the rebound is sustained over the next months, it should confirm the Fed's plan to pull the benchmark federal funds rate up from zero, where it has sat since the end of 2008 to help the economy recover from the Great Recession.
"This report will keep the Fed on track for tightening this year, but it will not help the case for moving earlier than September," O'Sullivan said.
Markets interpreted the data as pointing to later and slower rate hikes, and forgot about Fed Chair Janet Yellen's Wednesday remarks that shares were overvalued and the bond yields were dangerously low, given the Fed's rate plans.
Those comments sent stocks sinking and bond yields sharply higher.
But on Friday stocks took off again, with the S&P 500 up 1.3 per cent and back near record territory.
The 10-year treasury bond yield meanwhile plunged from 2.18 per cent to 2.12 per cent, below where it was just before Ms Yellen's remarks.