Job gains accelerate but wage growth is meager
WASHINGTON — Solid job gains resumed last month after an anemic March, but the rebound wasn’t strong enough to allay concerns that a modestly growing labor market still can’t generate much of a raise in workers’ paychecks.
The top-line numbers released Friday were good: 223,000 net new jobs and a tick down in the unemployment rate to 5.4%, the lowest level in nearly seven years.
“The job gains rebounded from the weather-beaten March figure, restoring some forward momentum,” said Sung Won Sohn, an economist at Cal State Channel Islands. “However, the job market still faces hurdles.”
The pace of wage growth slowed sharply in April, with average hourly earnings rising just 3 cents, half of the previous month’s increase. And the Labor Department reported a steep downward revision to 85,000 jobs for March’s already disappointing job growth.
The new March figure, largely caused by unusually bad weather in parts of the country and the aftereffects of the West Coast ports dispute, was the worst since 2012 and another sign that the economy probably contracted in the first three months of the year.
Those factors as well as continued head winds produced by weak global economies, a rising dollar and low oil prices led analysts to predict that Federal Reserve policymakers are more likely now to wait until at least September to increase the central bank’s benchmark short-term interest rate.
April job growth was in line with economists’ expectations for a rebound and appeared to hit a sweet spot for investors — strong enough to show that March’s weakness was an outlier but not so robust that it would push the Fed to enact an interest-rate hike at its next meeting in June.
“It seems like there’s something in here for just about everyone,” Mark Hamrick, Washington bureau chief of financial information website Bankrate.com, said of the jobs report.
“It doesn’t seem to raise the likelihood of a June rate increase, which is a sigh of relief for investors,” he said. Nor did it indicate that the economy had reached breakout velocity.
That helped put Wall Street in a buying mood. The blue-chip Dow Jones industrial average jumped 267.05 points, or 1.5%, to 18,191.11. The broader Standard & Poor’s 500 index rose 28.10 points, or 1.4%, to 2,116.10.
April was the 13th time in 14 months that the economy added more than 200,000 net new positions.
But the pace of hiring has slowed this year. Monthly job growth has averaged 194,000 compared with 260,000 last year, which was the best since 1999.
The report wasn’t as strong as some analysts had hoped, particularly on wage growth, said Sam Bullard, senior economist at Wells Fargo Securities.
He predicted the April data weren’t enough to persuade Fed officials at their mid-June meeting to raise the benchmark rate for the first time since before the Great Recession, even though they’ll have one more jobs report to consider by then.
“I think we would have needed to have seen stronger numbers” Friday, Bullard said. “While it’s positive and does signal a rebound in activity in the second quarter, it doesn’t signal it’s any stronger than the rate of growth for the recovery.”
A key positive element in the report was the unemployment rate hitting a new post-Great Recession low. Unlike in some previous months, the drop in the rate was not the result of more people dropping out of the labor force.
About 166,000 people jumped into the jobs pool in April, the Labor Department said. That pushed up the percentage of adults in the labor force by 0.1 percentage point to 62.8%, a rate that is still historically low.
Better weather in April helped spur strong hiring by construction firms. They added 45,000 net new jobs after shedding 9,000 positions the previous month.
Wage growth, however, was disappointing. Average hourly earnings rose 0.1%, to $24.87, after rising 0.2% in March.
In much of the country, it remains an employers’ market.
Iowa’s jobless rate, for instance, was 4% in March, the 10th lowest in the nation. But Diamond V, a fast-growing manufacturer of animal nutrition products in Cedar Rapids, has had little trouble filling 21 positions it has created this year, said Jeffrey Cannon, the company’s chief executive.
Except for specialized technical jobs such as animal science research, Cannon said, “we don’t see a lot of pressure to bid up [wages] for people we’re looking for.”
For existing workers at the 300-employee firm, pay increases have been fairly steady over the last several years, averaging 3% to 4% annually, he said.
The average U.S. worker hasn’t done as well. For the 12 months ended in April, wages rose 2.2%.
That’s well above inflation but below the 3.5% to 4% that marks a healthy economy, said Josh Bivens, the research and policy director at the Economic Policy Institute, a think tank focused on the needs of low- and middle-income workers.
The economy needs stronger jobs growth to increase demand for workers and push up pay, he said.
“It’s too slow to have spurred any increase in wage growth yet, and I still think its going to be a while,” he said of April’s employment gains.
Given that the economy appears to be stuck in another year of modest 2% to 2.5% economic growth, Bivens said, the Fed should not raise its benchmark interest rate yet.
Although some of the factors that caused the March hiring slowdown were temporary, other key ones remain.
The rising value of the dollar has hurt U.S. exporters, particularly manufacturers, and falling oil prices have led to cutbacks at U.S. energy companies.
Bullard said weakness in mining and manufacturing, two higher-paying industries, contributed to sluggish wage growth.
The mining industry, which includes oil and gas extraction, lost 15,000 net jobs last month after shedding 12,000 in March. It was the fourth straight month of job losses for the industry.
Manufacturers added just 1,000 positions last month after no growth in March.
Times staff writer Don Lee in Washington, D.C., contributed to this report.
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