Jobless Rate Rises As Hiring Slows

JEANNINE AVERSA
AP / Houston Chronicle 4may2007

WASHINGTON — The nation's unemployment rate edged up to 4.5 percent in April as cautious employers added the fewest new jobs in more than two years, signaling that the labor market is starting to feel some of the strain of the sluggish economy.

The fresh employment picture provided by the Labor Department on Friday showed that payrolls grew by just 88,000 last month as job losses spread beyond manufacturing and construction and into retailing and financial services. Workers' paycheck also grew more slowly.

The new tally of jobs added to the economy was the fewest since 65,000 jobs were added in November 2004. The rise in the unemployment rate, however, was slight compared with March's 4.4 percent rate — which had matched a five-year low. Taken together the figures suggest the labor market may be cooling a bit — but not collapsing — as the national economy makes its way through a soft patch.

Economists were predicting the unemployment rate would nudge up to 4.5 percent. However, they expected job growth to be a bit stronger, with employers adding around 100,000 new jobs to their ranks. Even with the fractional rise in the overall rate, joblessness in the 4 percent to 5 percent is relatively low by historical standards.

The new report also showed that job gains in February and March turned out to be a bit weaker than previously reported.

Employers added 90,000 positions in February, versus the 113,000 reported last month. Payrolls grew by 177,000 in March, slightly less than the 180,000 previously reported.

Workers' wages grew more slowly.

Average hourly earnings rose to $17.25 in April, a 0.2 percent increase from March. Economists were expecting a modest 0.3 percent rise. Over the past 12 months, wages grew by 3.7 percent, the slowest annual increase in a year.

Solid wage growth is good for workers and underpins consumer spending, a vital ingredient to the economy's good health. But a rapid pickup — if not blunted by other economic forces — can fan fears about inflation.

Even though the Federal Reserve has said its biggest concern is if inflation doesn't recede, it is expected to leave a key interest rate at 5.25 percent when it meets next Wednesday. The rate hasn't budged since last August. Before that the Fed had boosted rates for two years to ward off inflation.

The report comes as President Bush has coped with lukewarm ratings from the public for his economic stewardship, according to Ap-Ipsos polls. Hoping to tap into that angst, Democrats have championed a boost in the minimum wage and have stiffened their stance against Bush's free-trade policies, which critics contend has contributed over the years to the loss of U.S. factory jobs.

The labor market weakness in April reflected job losses in construction, manufacturing, retailing and financial services. Health care and education, leisure and hospitality, government and various professional and business services were among the sectors adding positions.

The length of workers' job hunt was a bit longer.

The average time the 6.8 million unemployed people spent in their job searches was 17.1 weeks in April, compared with 17.3 in March.

The economy in the January-to-March quarter grew at a feeble pace of 1.3 percent, the weakest in four years. It's the most up-to-date figure on gross domestic product, the best barometer of the country's economic fitness.

Economists predict the economy did better in the current April-to-June period — in the 2 percent range s which would still be considered sluggish. Growth is expected to pick up in the second half of the year. Still, the unemployment rate is expected to climb and reach close to 5 percent by year end.

Federal Reserve Chairman Ben Bernanke believes the economy will avoid falling into a recession this year, although his predecessor, Alan Greenspan, has put the odds at one in three.

source: 4may2007

Sluggish Job, Wage Growth
Ease Worries About Inflation

U.S. Nonfarm Payrolls Increased by 88,000 in April

BRIAN BLACKSTONE / Wall Street Journal 4may2007

WASHINGTON — U.S. employment grew at its slowest pace in more than two years last month, with those slim gains almost entirely in health care and government, pushing the unemployment rate slightly higher.

The erosion in job conditions also held wage growth in check, suggesting that the economic slowdown that began a year ago is having a damping effect on underlying inflation, which should prove comforting to Federal Reserve officials who are widely expected to hold interest rates steady next week.

Nonfarm payrolls increased 88,000 in April, its smallest gain since November 2004, after growing 177,000 in March and 90,000 in February, the Labor Department said Friday. Previous reports showed job growth of 180,000 in March and 113,000 in February.

The unemployment rate rose from 4.4% to 4.5%.

Average hourly earnings increased $0.04, or 0.2%, to $17.25. That was up just 3.7% from a year earlier, suggesting wage inflation is easing.

March's payroll gain was slightly below Wall Street expectations of a 110,000 rise, though an ADP-Macroeconomic Advisers report Wednesday had many economists looking for a lower reading. Economists had expected a 4.5% unemployment rate and 0.3% rise in wages.

The jobs data suggest that some of the economic weakness from the first quarter carried over into the current one, though recent manufacturing and services activity data suggest somewhat stronger momentum.

Still, with the jobless rate near six-year lows, consumers should remain supported in coming months. Consumer spending makes up about two-thirds of GDP, so even modest growth there can offset sizable drags in other sectors, as evidenced by last quarter's gross domestic product report.

The jobs data suggest the Fed will hold interest rates steady at 5.25% for a seventh-straight time when it meets next week. Though the Fed at its March meeting dropped its explicit reference to the possibility of higher rates, officials have since said they still see inflation as the primary policy risk.

High resource utilization, a nod to the still-low jobless rate, has been cited repeatedly by the Fed as an inflation risk. Still, underlying inflation measured by the personal consumption expenditures price index excluding food and energy — the Fed's preferred gauge — is running at only a 2.1% annual rate, which is very close to the Fed's understood 1% to 2% comfort zone.

That suggests that, to the extent that there are price pressures in the economy, they are coming from volatile sectors like food and energy and not the labor market.

The Labor Department said hiring last month in goods producing industries fell by 28,000. Within this group, manufacturing firms cut 19,000 jobs — the 10th-straight decline — while construction firms shed 11,000.

Service-sector employment, meanwhile, increased by 116,000. Retail fell by 26,100. Business and professional services companies' payrolls rose 24,000. Education and health services employment jumped by 53,000. Government added 25,000 jobs.

The average work week was down 0.1 hour at 33.8 hours.