Last updated on July 2nd, 2019 at 09:08 am
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 could seal the case for an interest rate increase next month despite moderate wage growth.
Nonfarm payrolls surged by 211,000 jobs last month, the Labor Department said on Friday, well above the monthly average of 185,000 this year and a jump from the gain of 79,000 in March.
The job gains were broad-based, with hefty increases in leisure and hospitality, health care and social assistance as well as business and professional services.
The drop of one-tenth of a percentage point in the unemployment rate took it to its lowest level since May 2007. The decline reflected both an increase in hiring and people leaving the labor force.
“With continued solid job growth, the U.S. economic expansion will continue throughout 2017. The Fed will raise the federal funds rate again in mid-June as the economy is approaching full employment,” said Gus Faucher, chief economist at PNC Financial in Pittsburgh.
The rebound in hiring supports the Federal Reserve’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 U.S. central bank on Wednesday kept its benchmark overnight interest rate, or federal funds rate, unchanged and said it expected labor market conditions would “strengthen somewhat further.”
The Fed raised rates by a quarter of a percentage point in March and has forecast two more increases this year.
Prices of U.S. government debt fell after the employment data while U.S. stock index futures rose. The U.S. dollar initially gained against a basket of currencies before turning flat.
Average hourly earnings rose seven cents, or 0.3 percent, last month, partly because of a calendar quirk. While that lowered the year-on-year increase to 2.5 percent, the smallest since August 2016, there are signs that wage growth is accelerating as labor market slack diminishes.
Average hourly earnings increased 2.6 percent in March. 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 push up wages.
The economy needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population. Job growth averaged 178,000 per month in the first quarter.
Construction payrolls rose 5,000 last month and manufacturing employment advanced by 6,000 jobs. Leisure and hospitality payrolls jumped by 55,000 in April. Professional and business services payrolls rose by 39,000. Health care and social assistance employment increased by 36,800 jobs.
Retail payrolls gained 6,300 after two straight months of declines. Retailers including J.C. Penney Co. Inc., Macy’s Inc.; and Abercrombie & Fitch have announced thousands of layoffs as they shift toward online sales and scale back on brick-and-mortar operations.
Government payrolls jumped 17,000 last month as an increase in hiring by local governments offset a decline in federal government employment.
Other labor market measures also showed strength last month.
A broad measure of unemployment, which includes people who want to work but have given up searching and those working part-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 a fresh eight-year high of 60.2 percent.
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