Home World Business US job growth rebounds sharply, unemployment drops to 10-year low at 4.4%

US job growth rebounds sharply, unemployment drops to 10-year low at 4.4%

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This could seal the case for a Fed rate increase next month despite moderate wage growth

Reuters  |  Washington  May 5, 2017 Last Updated at 19:41 IST

rebounded sharply in April and the rate dropped to 4.4 per cent, near a 10-year low, pointing to a tightening that could seal the case for an 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, healthcare and social assistance as well as business and professional services.

The drop of one-tenth of a percentage point in the 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 US economic expansion will continue throughout 2017. The will raise the again in mid-June as the 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 per cent annualised economic growth pace in the first quarter was likely “transitory,” and its optimism that economic activity would expand at a “moderate” pace.

The US central bank on Wednesday kept its benchmark overnight interest rate, or federal funds rate, unchanged and said it expected conditions would “strengthen somewhat further.”

The raised rates by a quarter of a percentage point in March and has forecast two more increases this year.

Prices of US government debt fell after the employment data while US stock index futures rose. The initially gained against a basket of currencies before turning flat.

Average hourly earnings rose seven cents, or 0.3 per cent, last month, partly because of a calendar quirk. While that lowered the year-on-year increase to 2.5 per cent, the smallest since August 2016, there are signs that wage growth is accelerating as slack diminishes.

Average hourly earnings increased 2.6 per cent in March. A government report last week showed private sector wages recorded their biggest gain in 10 years in the first quarter.

Full Employment

With the 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 needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population. 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. Healthcare 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 measures also showed strength last month.

A broad measure of unemployment, which includes people whowant to work but have given up searching and those workingpart-time because they cannot find full-time employment, dropped three-tenths of a percentage point to 8.6 per cent, 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 per cent.

US job growth rebounds sharply, unemployment drops to 10-year low at 4.4%

This could seal the case for a Fed rate increase next month despite moderate wage growth

This could seal the case for a Fed rate increase next month despite moderate wage growth

rebounded sharply in April and the rate dropped to 4.4 per cent, near a 10-year low, pointing to a tightening that could seal the case for an 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, healthcare and social assistance as well as business and professional services.

The drop of one-tenth of a percentage point in the 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 US economic expansion will continue throughout 2017. The will raise the again in mid-June as the 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 per cent annualised economic growth pace in the first quarter was likely “transitory,” and its optimism that economic activity would expand at a “moderate” pace.

The US central bank on Wednesday kept its benchmark overnight interest rate, or federal funds rate, unchanged and said it expected conditions would “strengthen somewhat further.”

The raised rates by a quarter of a percentage point in March and has forecast two more increases this year.

Prices of US government debt fell after the employment data while US stock index futures rose. The initially gained against a basket of currencies before turning flat.

Average hourly earnings rose seven cents, or 0.3 per cent, last month, partly because of a calendar quirk. While that lowered the year-on-year increase to 2.5 per cent, the smallest since August 2016, there are signs that wage growth is accelerating as slack diminishes.

Average hourly earnings increased 2.6 per cent in March. A government report last week showed private sector wages recorded their biggest gain in 10 years in the first quarter.

Full Employment

With the 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 needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population. 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. Healthcare 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 measures also showed strength last month.

A broad measure of unemployment, which includes people whowant to work but have given up searching and those workingpart-time because they cannot find full-time employment, dropped three-tenths of a percentage point to 8.6 per cent, 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 per cent.

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Reuters

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