Gains in US jobs touch 7-month low
Print Edition
THE US economy added the fewest number of jobs in seven months in April and Americans dropped out of the labor force in droves, signs of weakness that cast doubts on whether the Federal Reserve will raise interest rates before the end of the year.
Nonfarm payrolls increased by 160,000 jobs last month as construction employment barely rose and the retail sector shed jobs, the Labor Department said yesterday. That was the smallest gain since September and below the first-quarter average job growth of 200,000.
Adding to the report’s weak tone, employers added 19,000 fewer jobs in February and March than previously reported. The jobless rate held at 5 percent because people dropped out of the labor force.
“For those who had thought a June rate hike was in play, this was a nail in the coffin. This raises questions about a September rate hike. I would like to think the economy is in a better place at the end of the year,” said Phil Orlando, chief equity market strategist at Federated Investors in New York.
The stepdown in job gains could temper expectations of a strong rebound in economic activity in the second quarter after growth nearly stalled in the first three months of the year.
Economists polled by Reuters had forecast payrolls rising 202,000 last month and the jobless rate flat at 5 percent.
Average hourly earnings were the only bright spot in the employment report, up 8 US cents or 0.3 percent last month.
That took the year-on-year increase to 2.5 percent from 2.3 percent in March, still below the 3 percent advance that economists say is needed for inflation to rise to the Fed’s 2 percent target.
The US central bank last month offered a fairly upbeat assessment of the labor market, saying that conditions had “improved further.” The Fed raised its benchmark overnight interest rate in December for the first time in nearly a decade. Fed officials have forecast two more rate hikes for this year.
Market-based measures of Fed policy expectations have virtually priced out an interest rate increase at the Fed’s June 14-15 meeting, according to CME Group’s FedWatch. They see a below 40 percent probability of rate hikes in September and November, with a 48 percent chance at the December meeting.
The labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, fell 0.2 percentage points to 62.8 percent. It had risen 0.6 percentage points since dipping to 62.4 percent in September.
The labor force fell by 362,000 as people dropped out in April. The employment-to-population ratio fell to 59.7 percent from a seven-year high of 59.9 percent.
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