Washington: U.S. hiring topped forecasts in April as the jobless rate dipped to a fresh 49-year low and wage gains were slightly cooler than projected, suggesting the still-healthy labor market can continue to support growth without fueling inflation.
Payrolls climbed by 263,000 after a downwardly revised 189,000 advance the prior month, according to a Labor Department report Friday that exceeded all estimates in an economists consensus survey. The jobless rate unexpectedly fell to 3.6 percent while average hourly earnings growth was unchanged at 3.2 percent, below projections.
The solid reading follows calls from President Donald Trump and others for a Federal Reserve interest-rate cut to support the expansion. Policy makers reiterated their patient stance this week as Chairman Jerome Powell cited “very strong job creation’’ while also noting weaker inflation.
The surprising robustness follows months of broad labor market strength. While the expansion is poised to become the nation’s longest on record at midyear, economists expect a deceleration this year even after a strong first quarter.
Revisions for February and March added 16,000 more jobs than previously reported, while the three-month average fell to 169,000.
Friday’s data follow a Federal Open Market Committee statement Wednesday saying “the labor market remains strong.” Officials in March forecast a 3.7 percent unemployment rate at year end.
The payroll gains were somewhat uneven, with construction, health care, and professional and business services posting gains while retail employment fell by 12,000 for a third- straight decline.
Construction payrolls climbed by 33,000, the most since January, as manufacturing employment rose by 4,000. Factory employment was unchanged in the prior month after a previously reported drop.
Average hourly earnings rose 0.2 percent from the prior month after a revised 0.2 percent rise in the prior period. Wages for production and nonsupervisory workers accelerated to a 3.4 percent annual pace, signaling gains for lower-paid employees.
While the historically tight labor market has pushed companies to raise pay, inflation appears largely subdued, as the fatter paychecks don’t show any sign of fueling faster price gains.
At the same time, the average workweek got slightly shorter, boosting average hourly pay. The average for all private employees decreased to 34.4 hours, from 34.5 hours.
The U-6, or underemployment rate, held at 7.3 percent; the gauge includes part-time workers who’d prefer a full-time position and people who want a job but aren’t actively looking.
The participation rate, or share of working-age people in the labor force, decreased to 62.8 percent from 63 percent.
Private employment rose by 236,000 after increasing 179,000; government payrolls climbed by 27,000.
Nonfarm Payroll (NFP) Report
The Nonfarm Payroll (NFP) report is released on the first Friday of every month at 8:30 AM ET (Eastern Time) by the U.S. Bureau of Labor Statistics. NFP is a highly anticipated economic report which signals the strength of the US economy. It reveals the health of the jobs market, which filters down into inflation
It is closely analysed to predict Gross Domestic Product (GDP) growth and inflation rates and has the power to move global financial markets.
Economic indicators in the NFP report that markets and policy makers care about the most are Non-Farm Employment Change, Average Hourly Earnings and the Unemployment Rate:
Non-Farm Employment Change
Non-Farm Employment Change measures change in the number of employed people during the previous month, excluding the farming industry. Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity
Average Hourly Earnings
The wages growth data, Average Hourly Earnings, measures change in the price businesses pay for labor, excluding the farming industry. It’s a leading indicator of consumer inflation – when businesses pay more for labor the higher costs are usually passed on to the consumer;
Unemployment Rate measures the percentage of the total work force that is unemployed and actively seeking employment during the previous month.
Although it’s generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labor-market conditions.
Unemployment is also a major consideration for those steering the country’s monetary policy, especially the Federal Open Market Committee, FOMC.