May 7, 2018
US adds a modest 164,000 jobs; unemployment down to 3.9%
U.S. employers stepped up hiring modestly in April, and the unemployment rate fell to 3.9 percent, evidence of the economy’s resilience amid the recent stock market chaos and anxieties about a possible trade war.
Job growth amounted to a decent 164,000 last month, up from an upwardly revised 135,000 in March, the Labor Department said Friday. The unemployment rate fell after having held at 4.1 percent for the prior six months largely because fewer people were searching for jobs.
The gains reflect an economy that has been steadily expanding for almost nine years, gradually putting more people to work after the country endured the worst financial meltdown since the Great Depression in the 1930s.
Many employers say it’s become difficult to find qualified workers. Even so, they haven’t significantly bumped up pay in most industries. Average hourly earnings rose 2.6 percent from a year ago.
The overall unemployment rate remained, as in recent months, the lowest since December 2000. The rate for African-Americans — 6.6 percent — is the lowest on record since 1972.
Many economists say the unemployment rate is now so low that wage growth should begin to climb this summer, since employers will face more pressure to boost pay in order to hire workers.
“It’s just not sustainable for average pay growth to be so low in a labor market this tight,” said Andrew Chamberlain, chief economist at the jobs site Glassdoor.
An encouraging sign for the economy is that the pace of hiring has yet to be disrupted by dramatic global market swings, a recent pickup in inflation or the risk that the tariffs being pushed by President Donald Trump could provoke a trade war. Over the past three months, monthly job growth has averaged 208,000.
Much of the economy’s durability is due, in fact, to the healthy job market. The increase in people earning paychecks has bolstered demand for housing, even though fewer properties are being listed for sale. Consumer confidence has improved over the past year. And more people are shopping, with retail sales having picked up in March after three monthly declines.
Manufacturers added 24,000 workers last month, a sign that possible tariffs on steel, aluminum and Chinese goods haven’t altered hiring plans at most U.S. factories. Restaurants and hotels hired a net 18,000. The health care and social assistance sector added 29,300 jobs and the construction industry 17,000.
The monthly jobs reports have yet to show a consistent surge in average annual wage growth. Even so, workers in the private sector during the first three months of 2018 enjoyed their sharpest average income growth in 11 years, the Labor Department said last week in a separate report on compensation.
That pay growth suggests that some of the momentum from the slow but steady recovery from the 2008 financial crisis is spreading to more people after it had disproportionately benefited the nation’s wealthiest areas and highest earners.
With qualified job applicants harder to find in many industries, employers have become less and less likely to shed employees. The four-week moving average for people applying for first-time unemployment benefits has reached its lowest level since 1973.
The trend reflects a decline in mass layoffs. Many companies expect the economy to keep expanding, especially after a dose of stimulus from tax cuts signed into law by Trump that have also increased the federal budget deficit.
Inflation has shown signs of accelerating slightly, eroding some of the potential wage growth. Consumer prices rose at a year-over-year pace of 2.4 percent in March, the sharpest annual increase in 12 months. The Federal Reserve has an annual inflation target of 2 percent, and investors expect the Fed to raise rates at least twice more this year, after an earlier rate hike in March, to keep inflation from climbing too far above that target.
The home market, a critical component of the U.S. economy, has been a beneficiary of the steady job growth. The National Association of Realtors said that homes sold at a solid annual pace of 5.6 million in March, even though the number of houses for sale has plunged. As a result, average home prices are rising at more than twice the pace of wages.