Unemployment falls to six-year low
WASHINGTON – The American economy shrugged off the end of a brutal winter last month, rebounding with the biggest hiring surge in two years and suggesting that the job market’s gains could endure.
Employers added 288,000 jobs across industries from manufacturing to construction to accounting. Even local governments hired. The unemployment rate sank to 6.3 percent, its lowest point since 2008, from 6.7 percent.
But the rate fell that far because many fewer people began looking for work in April, thereby reducing the number of unemployed. The proportion of Americans who either have a job or are looking for one dropped to a three-decade low.
And the monthly employment report the government released Friday showed that worker pay has yet to pick up – evidence that the job market has not fully recovered.
Yet April’s robust hiring gains suggested that the economy is returning to the solid pace of growth it achieved in the second half of 2013, before it was hammered by a harsh winter. Job growth has averaged 203,000 a month in the past six months, similar to last year’s average of 194,000.
Analysts said the economy is facing fewer hurdles now. In addition to better weather, growth is no longer held back by steep government spending cuts, which slowed growth in 2013. Many companies had also stockpiled too many goods last fall, forcing them to cut back in the first quarter to clear their shelves.
“The absence of these factors is finally allowing the economy’s underlying strength to come to the surface,” said Bart Van Ark, chief economist at the Conference Board. “The result is not just a relatively strong gain in jobs in April but probably more of the same in May and June.”
The unemployment rate is now at the lowest level in 5 1/2 years. It’s fallen far enough that economists are anticipating the key next step in an improving job market: higher pay. In the past, when employers have had to draw from a smaller pool of unemployed people, they’ve typically been forced to offer higher pay.
That hasn’t happened yet. And analysts differ about when pay might pick up.
Joseph LaVorgna, chief U.S. economist at Deutsche Bank, noted that the unemployment rate is near its seven-decade average of 6.1 percent. At that point, “you’ve typically seen wage and inflation pressures build,” LaVorgna said. “And I see no reason why it won’t happen this time as well.”
But other economists point to factors suggesting that there are still a huge number of Americans desperate for full-time work. The number of people working part-time jobs who would prefer full-time positions, for example, rose by 50,000 last month to 7.5 million.
Average hourly wage growth was flat in April, suggesting that unemployment is still too high to force pay up.
Hiring last month was broad-based and included some higher-paying jobs: Manufacturing gained 12,000, construction 32,000. Professional and technical services, which include accounting and engineering positions, added 25,100 jobs. The number of government jobs grew 15,000, mostly at the local level.
The jump in hiring comes after a spate of other data showed that the economy is improving. Consumers are ramping up spending, businesses are ordering more goods and manufacturers are expanding. The strengthening numbers show that harsh snowstorms and frigid cold in January and February were largely to blame for the economy’s scant growth at the start of the year.
The economy barely expanded from January through March, eking out an annual growth rate of just 0.1 percent, down from a 2.6 percent rate in the final three months of 2013.
All told, the positive news has led most economists to forecast a strong rebound in economic growth – to a 3.5 percent annual rate in the current April-June quarter. And they expect it to reach nearly 3 percent for the full year, up from 1.9 percent in 2013.