The pace of hiring picked up again in April and the unemployment rate fell to the lowest level in nearly a decade, evidence the U.S. economy is poised for a spring rebound after a lackluster start to the year.
Nonfarm payrolls rose by a seasonally adjusted 211,000 in April from the prior month, the Labor Department said Friday. The unemployment rate for April edged down to 4.4% from the prior month's 4.5% reading.
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The unemployment rate hasn't been this low since May 2007 and that matched the lowest rate of any point during the prior expansion.
Monthly payroll growth has averaged 185,000 so far this year, nearly matching its pace of growth in 2016.
"This is an unambiguously strong economic report and suggests that consumers will have the wherewithal to increase spending in the second quarter," said David Berson, economist at Nationwide Mutual Insurance Co.
The low jobless rate means the Federal Reserve is likely to raise its benchmark short-term interest rate when officials next gather in June, and then again likely in September, and that the Fed could start winding down its bond portfolio later this year.
A low rate tends to mean upward pressure is building on wages and inflation. Still, it comes with a caveat: A smaller share of Americans are participating in the labor force this year, compared with a decade ago, partly a result of retiring baby boomers.
The economy has added better than 200,000 jobs in three of the past four months. The exception was March. Employers added a downwardly revised 79,000 jobs that month, compared with an initial estimate of a 98,000 increase.
Strong hiring supports the projection that economic growth is accelerating this spring. Many economic forecasters expect the annual growth rate in gross domestic product to accelerate to better than 3% for the April through June period, from the modest 0.7% pace of the first quarter. The Federal Reserve and other economists project overall growth in 2017 to settle near 2%, its pace for most of this expansion.
Average hourly earnings for private-sector workers rose 2.5% in April compared with a year earlier. Annual wage gains firmed most of last year, reflecting increased competition for workers. But the pace of raises slowed since December's 2.9% increase, the strongest gain since June 2009.
That softening of wage growth could prove temporary, if employers start to struggle to find qualified workers.
"The labor market is very tight and increases the chance of an acceleration in wage inflation in the near term," said Mickey Levy, economist at Berenberg Capital Markets.
The U.S. labor market has been one of the brightest spots in a long recovery marked by slow economic growth. Payrolls this year have expanded similarly to the strong rate recorded since 2011. Those gains have come despite historically soft economic growth of near a 2% annual rate.
To support better economic growth, especially when productivity gains have been weak, employers need to draw more workers into the labor force.
That could become a challenge because the share of Americans working or seeking work has generally declined the past 15 years, in part reflecting the aging of the U.S. population.
The labor-force participation rate in April ticked down to 62.9% from 63% in March. The rate has mostly steadied over the past year, which could reflect, at a minimum, a slower flow of workers leaving the labor force.
An alternative measure of unemployment and underemployment, which includes those who have stopped looking and those in part-time jobs who want full-time positions, was 8.6% in April, versus 8.9% the prior month. It was the lowest level since late 2007.
The rate, designated U-6, averaged 8.3% in the two years before the recession.
April job gains were fairly broad-based with strong hiring in professional and business services, health care and leisure and hospitality.
Retailers added jobs in April after two monthly declines. Employment at all levels of government rose by 17,000.
More broadly, the U.S. labor market has added jobs every month since October 2010, a long stretch that has slowly repaired much of the damage from the Great Recession and allowed the Fed to start raising short-term interest rates from near zero.
Central-bank officials this week held short-term interest rates steady, but indicated two more increases could occur later this year.
"The labor market has continued to strengthen even as growth in economic activity slowed," Fed officials said in their postmeeting statement.
A low unemployment rate could give the central bank leeway to tighten monetary policy further.
Write to Eric Morath at firstname.lastname@example.org
(END) Dow Jones Newswires
May 05, 2017 10:50 ET (14:50 GMT)