Strong April jobs report also contains warning signs on labor market
Employers added 288,000 jobs in April, a surprise to analysts, who were expecting an increase of less than 220,000.
The unexpectedly strong job creation in April was a welcome sign to economists that slow hiring over the winter appeared to be related to severe weather and not a harbinger of another downturn in the uneven recovery.
But the economy probably can’t sustain the 288,000 net new jobs pace, which included industries such as construction catching up on hiring after a winter lull, they said.
And Friday’s government report contained warning signs that the labor market is far from fully healed.
“More than likely April was a bit of a rogue month,” said Brian Bethune, chief economist at Alpha Economics Foresights.
The top-line number -- the best monthly job creation since January 2012 -- “was certainly good and reassuring,” said Diane Swonk, chief economist at Mesirow Financial.
But an increase in the number of people dropping out of the job market was the main reason the unemployment rate fell sharply to 6.3% from 6.7%, she said.
The civilian labor force shrunk by 806,000 in April and the participation rate fell by 0.4 percentage points to 62.8% after having increased for three straight months. The April figure matched December as the lowest labor force participation rate since the late 1970s.
“It’s something we need to worry about,” Swonk said. “That tempers the big number a lot.”
The drop in the labor force muted the reaction by investors to the jobs report. The Dow Jones industrial average initially shot to a record high in early trading before falling into slightly negative territory.
“The immediate reaction was, ‘That’s quite impressive,’ ” said Chris Beauchamp, a market analyst at financial trading firm IG. “The headline was great. The unemployment rate was down. But the labor force was weakening as well.”
Still, the surge in hiring in April, combined with an upward revision of job growth by a combined 36,000 for the previous two months, gave some economists confidence the economy was heating up this spring.
“To put it in a baseball analogy, the economy was down in the count after having a lousy few months. Now it’s had a hit -- a double,” said Stuart Hoffman, chief economist at PNC Bank. “The good news is the economy didn’t strike out.”
