Archive for Saturday, May 8, 2004

Jobless rate falls as hiring picks up

Labor report indicates economic growth gaining momentum

May 8, 2004

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— U.S. job growth rose strongly for a second straight month in April and the unemployment rate dipped slightly, the government reported Friday, providing more evidence that the nation's labor market improved markedly this spring.

Employers added 288,000 new jobs to their nonfarm payrolls last month, on a seasonally adjusted basis, and the unemployment rate slid to 5.6 percent from 5.7 percent the month before, the Labor Department reported.

The employment picture for the preceding months also was brightened considerably by revisions to previously reported figures. The combined job gains in February and March were 66,000 higher than earlier thought, which means the economy has added an average of 238,000 new jobs a month for the past three months, well above the level many economists think necessary to keep up with population growth.

Manufacturers also were hiring during the past three months, for a total gain of 66,000 jobs, a big improvement over previous reports that had indicated flat employment in March following 43 consecutive months of decline.

Together, these figures and others indicated that the economic recovery gained new momentum this spring, with healthy job growth adding new fuel to growth.

"The longest jobless recovery during the postwar period is over," said Sung Won Sohn, chief economic officer of Wells Fargo Economics. "Businesses have regained confidence in the sustainability of this economic expansion and have started to hire people in earnest."

Until recently, the economic recovery from the 2001 recession had been propelled primarily by government efforts to boost consumer and business spending through tax cuts and low interest rates. While the economy grew at a 4.2 percent rate in the first three months of the year, job growth continued to disappoint for a longer period than after any other downturn since the Great Depression.

Despite a promising jump in hiring in March, many economists had worried until Friday that the recovery could falter again, as it had several times before, if the labor market failed to strengthen in a significant, sustained way.

"While I'd still like to see one more month of solid job growth to feel completely confident, I think we can now say that we are firmly on a track of economic expansion," said William Cheney, chief economist at MFC Global Investment Management. "As long as job growth was anemic, there was always the worry that consumer spending might fall off. Now, with job growth apparently booming, those worries tend to evaporate."

Economists generally agreed the report means it is much more likely the Federal Reserve will start raising interest rates soon, perhaps as early as June, to prevent a takeoff in inflation. Many interest rates determined by financial markets, such as mortgage rates, have already started rising in anticipation.

Bush administration officials hailed the report as evidence that the president's tax cuts are working to stimulate economic growth and create jobs.

"The longer Americans and American businesses feel the relief of the president's tax cuts, the more the tide of our economy rises," Treasury Secretary John Snow said in a statement, noting that employers have added more than 1 million jobs since August and that the jobless rate is below the average of the past three decades. Democrats noted the number of jobs remained 1.6 million lower than it was in March 2001, when the last recession began.

"Any step forward in the job market is good news for America's workers, but let's be clear: We still have a long way to go to get America working again," said presidential candidate Sen. John Kerry, D-Mass. "America is still in the worst job recovery since the Great Depression, with 2.2 million private-sector jobs lost in the Bush presidency, 8.1 million Americans still looking for work, and long-term unemployment at the highest level in twenty years."

The share of the work force unemployed for more than six months remained relatively high, but fell to 22.1 percent in April from 23.9 percent the month before, the report showed.

The number of unemployed workers slipped to 8.2 million from 8.4 million the month before.

About 4.6 million more jobless people say they want a job, but they are not counted among the unemployed because they have stopped looking. Another 4.6 million people say they are working part-time because they cannot find a full-time job. When those people are included, the so-called rate of labor underutilization was 9.6 percent last month, down from 9.9 percent the month before.

The number of people in the labor force, that is who had work or who were looking for work, rose slightly. But the share of the civilian adult population participating in the labor force held steady at 65.9 percent for the third consecutive month. The share of the total working age population also was unchanged in April at 62.2 percent.

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