Job growth calms fears of a slump
WASHINGTON — So much for a spring swoon.
The economy created more jobs than expected in April and the government boosted hiring figures for the previous two months, easing fears that the recovery was headed for a significant slowdown.
The Labor Department reported Friday that 165,000 net new jobs were added last month and sharply upgraded the totals for February and March by a combined 114,000 positions. The news sparked a market rally as key indexes vaulted to record highs.
The unemployment rate ticked down one-tenth of a percentage point to 7.5%, the lowest level since December 2008. Unlike some previous drops, it wasn’t because more people got discouraged and simply stopped looking for work.
“The drop in the unemployment rate was for the right reasons,” said Stuart Hoffman, chief economist at PNC Financial Services. “This wasn’t just more people dropping out of the workforce. There were actually more people looking for work, and they found it.”
The upbeat news triggered a huge sigh of relief among economists and investors who feared that the initially poor March jobs numbers signaled that the recovery was stalling for the third spring in a row.
Federal Reserve policymakers even indicated for the first time this week that they were prepared to increase their unprecedented stimulus efforts, if needed. Economists had expected growth to slow somewhat this quarter in the face of automatic federal spending cuts before picking up in the second half of the year.
Despite the upbeat news, Friday’s jobs report showed that, in many ways, the labor market still is struggling to get back to normal. There were 11.7 million unemployed people in April, down only slightly from March.
Government shed 11,000 positions, with more potentially coming as more budget cuts mandated by the so-called sequester take effect. The construction industry dropped 6,000 jobs, the first loss in nearly a year. And the well-paying manufacturing sector added no new jobs.
“People are really happy” about the overall jobs report, said Heidi Shierholz, an economist with the Economic Policy Institute, a liberal think tank. “But once that excitement wears off, it’s, ‘... this still is a problem.’”
The pace of job growth in April, while better than expected, was not great, she said. And many of the jobs added were temporary or were in fields such as restaurant work and retail sales that offer lower pay and fewer benefits.
Esther Harkreader, 45, of San Francisco, found no good-paying options after she was laid off last year from her $20-an-hour job as a dispatcher for messengers at a legal company.
“I had three months looking for a job and it got so discouraging,” said Harkreader, who since has gone back to school to learn health information technology under a state job-training program. “I can’t just go get a $10 an hour job because I wouldn’t be able to survive in San Francisco.”
Temporary and lower-paying jobs often come back first before higher-wage jobs after a major downturn. But the slow recovery from the Great Recession has seen more of those jobs.
“We’re not creating high-income jobs and that’s a concern because ultimately that’s what’s going to drive the economy,” said Kathy Bostjancic, director of macroeconomic analysis at the Conference Board.
Still, Wall Street appeared jubilant Friday.
The Dow Jones industrial average and the Standard & Poor’s 500 index climbed to all-time highs during trading, though both closed lower. The Dow, which cracked 15,000 for the first time, ended with a gain of 142.38 to a record 14,973.96, and the S&P; also hit a record close, gaining 16.83 to 1,614.42
With Friday’s upward revisions for February and March employment figures, the economy now is averaging 196,000 additional jobs a month so far this year, a solid number showing continuing growth but not big enough to jolt the recovery forward.
The number of employed workers increased by 293,000 in April after declining about 200,000 the previous month when people dropped out of the workforce. Private companies added 176,000 jobs last month.
Concerns were high last month after the government initially reported the economy added just 88,000 net new jobs in March. But on Friday, the Labor Department revised that figure to a more respectable 138,000.
Already strong job growth of 268,000 in February was revised up to 332,000. That was the best monthly performance since May 2010 when the numbers were boosted by the hiring of more than 400,000 temporary census workers. Excluding that month, the revised jobs added in February were the most since 2005.
Hoffman said he expected April’s job-creation number to be revised higher as well. He also said that the economy would avoid a spring swoon because of the improving housing market and lower gas prices.
“When you got that initially disappointing March jobs report, for the past month everybody said, “Uh-oh, the economy’s going to do it again, just wilt or melt with better weather,’” Hoffman said. “This proves that’s not happening. The economy’s going to do better this spring.”
But even at February’s 332,000 job-creation pace, it would take until the start of 2016 to get back to the pre-Great Recession unemployment rate of 5%, Shierholz said. At the 196,000-jobs-a-month pace so far this year, it would take until the summer of 2018 to get back to a normal level, she said.
“We just have an incredibly weak labor market, so a report that just holds us steady is a huge problem,” Shierholz said.
