U.S. Jobless Rate at 30-Year Low of 3.9%
U.S. unemployment fell below 4% last month for the first time in 30 years, a strong performance that kept spreading the benefits of the economic expansion to more American workers.
The U.S. Labor Department reported Friday that April’s jobless rate was 3.9%, down from 4.1% in March, as employers added 340,000 workers to their payrolls. The robust job market also continued to boost wages, now up at an annualized rate of 4.5% this year, and cut joblessness for Latinos and blacks to their lowest levels on record.
Economists said the only downbeat note is that the brisk job growth raises the likelihood that the Federal Reserve will increase interest rates more aggressively to head off inflation. Many analysts now say that the Fed--which has boosted short-term interest rates five times since last June, a quarter-point each time--is likely to lift rates by a half-point when its policymakers next meet May 16.
For now, though, “the riches of the expansion are reaching the masses,” said Diane Swonk, chief economist of Chicago-based Bank One Corp.
“It’s finally reached people who never thought they’d be part of it before,” she added. “The good news is that it won’t end tomorrow. The bad news is that it won’t be as easy as it’s been in past years for Wall Street,” which will have to contend with higher wages and higher interest rates.
Swonk said the Fed policymakers might be vexed by the unemployment rate falling below 4%, calling the level “a real psychological threshold.” Last month’s joblessness was the nation’s lowest level since January 1970, when the rate also was 3.9%. The previous low for the nation’s current, record-long expansion was the 4% mark achieved in January.
Sung Won Sohn, Minneapolis-based chief economist of Wells Fargo & Co., agreed. He said that “4% has been viewed as the sound barrier, and we’ve now gone below that.”
Even so, Wall Street was upbeat, aided by renewed faith in technology stocks. The Dow Jones industrial average rose 165.37 to close at 10,577.86, and the Nasdaq composite index climbed 96.58 to finish at 3,816.82, more than halving the losses that both indexes posted earlier in the week.
April’s job gain was inflated by the federal government’s hiring of 73,000 temporary workers for Census 2000. All the same, the 267,000 non-census jobs created last month were considered a strong gain. So far this year, an average of 222,000 private payroll jobs have been added a month, up from 198,000 for all of last year.
What’s more, March’s job gains were revised up to 458,000, including 117,000 census workers.
Last month’s gains were concentrated in retailing and service employment, along with the census jobs. The only industry showing a big job loss was construction, which posted a decline of 55,000, and even that may have been attributed to faulty statistical adjustments used to filter out seasonal trends. In other examples of the strength of the job market, the length of the average workweek rose and manufacturing workers put in more overtime.
Economists said job growth is pressing the outer limits of the pool of available workers.
“The amazing story of this recovery is that we’ve been able to find bodies to support economic growth so far,” Sohn said. Workers “basically have been coming out of the woodwork. We’re using not just the traditional labor supply but prison labor, [more] mothers, more teenagers and the disabled. The economy has been trying to find as many bodies as we can, across the board, but it’s becoming more and more difficult.”
Along the way, the job market has smashed through barriers that traditionally have translated into higher unemployment rates for minorities. Among the results: The jobless rate among Latinos declined to 5.4% in April, down from 6.3% in March and the lowest level since the government started tracking that figure in 1973. Likewise, joblessness among African Americans edged down to 7.2% last month, from 7.3% in March, its lowest mark in the 28 years that the government has tracked black unemployment as a separate category.
Employers and employment agencies around much of the country continue to complain of labor shortages and, in response, are changing their hiring strategies. Karen Delfs, the Seattle-based manager in charge of the Randstad North America employment agency offices in Washington state, said many of her employer clients are offering signing bonuses and stock options to attract new workers.
Delfs said employers also are increasingly putting workers on their permanent staffs immediately, rather than trying them out as temps or putting them through probationary periods. Employers “don’t want to risk losing a candidate who they think would be a good fit.”
What perplexes some analysts and worker advocates, however, is that the Federal Reserve might choke off too much job growth as it acts to head off inflation. While economists across the board agree that inflation undercuts business growth and eats away at workers’ paychecks, liberals generally push for looser monetary policy in hopes of putting more people to work.
Dean Baker, an economist with the liberal Washington, D.C., think tank the Center for Economic and Policy Research, called the April employment report a good report for American workers. He added, however, that “the downside is that you worry about how the Fed will see this. If it sees this as a reason to slam on the brakes, it won’t be good news.”
Average hourly earnings for nonsupervisory workers rose by 6 cents to $13.64, or 0.4% for the month. That was up from 0.3% in March, and reflects gains of 3.8% over the past 12 months and this year’s current pace of 4.5%.
At issue, though, is whether those wage gains will stay ahead of inflation. One widely used inflation measure, the consumer price index, climbed at an annualized rate of 5.8% during the first quarter of the year. That would more than wipe out recent pay gains. On the other hand, another measure of inflation used in tandem with the gross domestic product was up at only a 2.7% pace during the first three months of 2000.
Still, with this week’s report showing that productivity growth slowed in the first quarter, and with various accounts of employers paying more in wages and in health insurance costs, inflation-watchers are increasingly wary.
Sohn, for instance, sees no signs of the job market weakening but warned that average workers and consumers “should worry about inflation eating away at their buying power.”
The employment reports were welcomed by President Clinton, who noted that joblessness now stands at its lowest peacetime level since 1957. “The productivity of the work force, continuing to be fueled by information technology, has enabled us to have an amazing amount of growth and low unemployment at quite modest levels of inflation.” He added that inflation would moderate as oil prices fall.
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Unemployment’s Ups and Downs
The nation’s unemployment rate in April dropped to the lowest point since President Nixon was in office 30 years ago. The economy continued its record expansion.
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January 1970: 3.9%
December 1982: 10.8%
April 2000: 3.9%
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Source: U.S. Department of Labor
