WASHINGTON: Unemployment in the world’s largest economy fell to the lowest rate in 10 years due to a strong rebound in job creation in April, bringing relief to Donald Trump after disappointing economic data early in his presidency.
After a slow March, when hiring likely was held down by a winter storm, the US economic engine added an estimated 211,000 net new positions while the jobless rate fell a tenth to 4.4%, the lowest since May 2007, the Labor Department reported Friday.
US stock indices S&P 500 and Nasdaq finished at fresh records on Friday following a bounce in oil prices and a solid US jobs report for April.
The solid data strengthen the case for the Federal Reserve to stick to a planned course of two more interest rate hikes in 2017 and may even begin to worry the inflation hawks among the central bankers.
The result handily surpassed an analyst consensus, which had predicted 180,000 new jobs for the month, and rebound in the unemployment rate to 4.6%.
The White House hailed the news after a first quarter when economic data appeared to have softened. Trump has vowed to add 25 million new jobs over a decade but economists say this may be unrealistic. In his weekly address, Trump said his administration was “hard at work, tearing down the barriers to job creation.”
The jobs report pointed to continuing economic recovery but also to an increasingly tight labour market, which could begin to fuel inflation worries, especially as wages continued to climb in April.
Average hourly earnings rose nearly 0.35% for the month to $26.19. But measured over 12 months, the gains appeared softer. April wages were 2.5% higher than the same month last year, down from the 2.6% gain recorded in March.
The unemployment rate has now fallen 0.6 percentage points since the start of the year, with 854,000 fewer unemployed people, while average monthly job creation of 185,000 so far in 2017 is in line with last year’s trend.
Former Federal Reserve vice Chair Alan Blinder called the lack of stronger wage growth a “surprising soft spot” in the latest jobs numbers.
But most economists think the report provides more justification for the Fed to continue its gradual rate increases, a process it calls “normalisation” from the zero rates during the financial crisis.
Published in The Express Tribune, May 7th, 2017.