WASHINGTON, D.C.: US employers cut back hiring in April in the wake of the economy’s sharp downturn, raising worries of a protracted slowdown in the world’s largest economy.
Net new jobs fell unexpectedly to the lowest level in seven months, with just 160,000 additional jobs generated, over 40,000 less than economists predicted, the Labor Department reported over the weekend.
That was still a strong enough pace to continue absorbing new entrants to the jobs market and bringing down the unemployment rate, which held steady at 5.0 percent, one of the lowest levels among leading economies.
But coming in well below the six-month average of 242,000 jobs, the figure added to concerns that the fall in the pace of overall economic growth to just 0.5 percent during the January-March period could persist through the current quarter.
Analysts said there were enough signs of strength in the fresh data to chalk off April hiring as part of a temporary lull in the economy, including a slight pickup in wage growth and still-strong recruitment in key services sectors.
“That makes April the 74th consecutive month of private-sector job growth in America. Over that record streak of job growth, our businesses created 14.6 million new jobs in all,” said President Barack Obama after the release.
However, Obama added, “We’ve got to do everything we can to strengthen the good trends and to guard against some dangerous trends in the global economy.”
June rate hike unlikely
Analysts said the April numbers were weak enough to create room for the Federal Reserve to hold off from raising interest rates in June.
“This is certainly not the unequivocally strong report that the Federal Reserve would have liked to see,” said Harm Bandholz, chief US economist at UniCredit Economics, in a client note.
“By adding to signs that economic weakness is lingering into the second quarter, these disappointing numbers greatly reduce the likelihood of the Fed hiking rates this side of the presidential election” in November, added Markit economist Chris Williamson.
The data suggested that gains from the prior two months, especially indications that the jobs market was absorbing a large number of long-time dropouts, were possibly overstated.
The number of people not in the labor force surged by 562,000 last month, and the labor force participation rate fell by 0.2 percentage point to 62.8 percent, giving up recent gains.
Hiring in April was virtually flat in the important construction sector, which had added 41,000 new jobs in March. The mining sector, including coal, oil and natural gas, continued to bleed jobs, as did government employers.
The retail trade, a strong contributor to growth in the past year, also shed about 3,000 jobs—possibly the consequence of a recent pullback in consumer spending growth that has surprised and worried analysts.
But hiring remained strong in health care and hospitality sectors, and in professional services.
And hourly wage growth picked up pace month-on-month, though it remained just barely higher at 2.5 percent year-on-year.
University of Michigan economist Betsey Stevenson argued however that the April employment data was still as strong as it needs to be.
“We need job growth of roughly 80,000 a month to hold steady, this month was double that. This is pretty rapid growth for five percent unemployment,” she said via Twitter.
Nariman Behravesh, economist at consultancy IHS, called the slower jobs growth “seasonal payback” for the strength earlier in the year.
“Most indicators of the labor market continue to point to ongoing strength,” he argued in a client note, predicting a rebound to 200,000-plus levels.
The markets read the data as putting off a bit the next Fed rate increase, after it raised its benchmark short-term rate to 0.25 percent to 0.50 percent in December.
Yields on short-term Treasury notes were slightly lower, but were higher in the long-term bonds.
The dollar was flat against the euro and down slightly on the yen, while US stocks edged higher after an early loss, with the broad-based S&P 500 adding 0.3 percent by the close.