WASHINGTON: The US economy pumped out 288,000 jobs in April, the highest pace in over two years, in a fresh confirmation that growth has resumed after a harsh winter freeze.
Coupled with upward revisions for the previous two months, Labor Department data Friday showed a firm rebound in hiring after a tepid winter pace that had spurred worries of a more fundamental downshift in activity.
The unemployment rate meanwhile plunged to 6.3 percent from 6.7 percent, the lowest level since September 2008. But that figure was deceiving.
It came out of an unexplained sharp fall in the size of the active labor force rather than new hiring, and pointed to a continued challenge to bringing down joblessness overall around the country.
The job gains were widespread, led by new positions in professional and business services, healthcare and retail trade.
Jobs in construction also picked up; the sector fell nearly flat amid the series of frigid winter storms that swept the eastern half of the country repeatedly between December and February.
The report “signals that American companies are optimistic the economy will snap back smartly after the largely weather-related slump in the first quarter,” said Sal Guatieri of BMO Capital Markets.
Doug Handler, chief US economist at IHS Global Insight, said the data was strong enough to drive a rebound in second-quarter economic growth to a 3.0-4.0 percent pace, after the 0.1 percent stall of the first quarter.
It was the 50th straight month of jobs gains, and all but 113,000 of the 8.7 million jobs lost in the Great Recession have been restored.
“While this month’s report happens to be above expectations, it is still broadly consistent with the recent trends we have been seeing in the labor market,” the White House’s top economist Jason Furman said in a statement.
As encouraging as the job creation numbers were, the data behind the unemployment rate fall contained some areas of concern.
The often-volatile household survey showed a drop of 806,000 in the size of the labor force, and a slump in the number of people joining or rejoining the labor force.
That explained much of the steepness in the jobless rate fall, and took the labor force participation rate to 62.8 percent, matching the lowest level in the post-2008 economic crisis period. Before the crisis, the participation rate was above 66 percent.
There was a fall in the number of long-term unemployed, but it remained high at 3.45 million. In addition, workers’ earnings and hours worked were flat.
That data suggested that policy makers, including at the Federal Reserve, will still see the gains from the April data as a glass half-full and keep policies in place to boost the economy.
While the Fed has been steadily trimming its bond-buying stimulus program since December, it has signaled that it does not expect to increase the benchmark federal funds interest rate from the current near-zero level before the second half of 2015.
Federal Reserve Chair Janet Yellen has repeatedly pointed to the still-high levels of long-term unemployed people and part-time workers, the low participation rate, and the slow growth in incomes.
Joshua Feinman, global economist at Deutsche Asset and Wealth Management, said that, even if the new job gains were fairly strong, the economy was far from having fully rebounded after the economic crisis.
“Even using a conservative estimate of the ‘breakeven’ rate of job creation, employment is still roughly six million shy of what might be considered ‘full employment,'” he said.
Given the mixed signals from the data, the market reaction was muted. The dollar made a shortlived jump against the euro, quickly returning to where it started, around $1.3871 per euro.
Bond yields leaped but remained much below the year’s highs. The 10-year Treasury yield pushed up 50 basis points to 2.66 percent, and then sank back to a bearish 2.59 percent.
“Steep declines in the unemployment rate and underemployment rate are only considered positive developments if it is due to quality job gains, not an exodus from the labor force,” said Jay Morelock of FTN Financial.
Stocks meanwhile slowly turned lower, the S&P 500 finishing the day off 0.14 percent at 1,881.12.