WRAPUP 6-U.S. job market resilience eases growth concerns

Fri May 3, 2013 4:59pm EDT

Related Topics

* Nonfarm payrolls expand by 165,000 jobs in April
    * February and March revised up by net 114,000 jobs
    * Jobless rate falls to 7.5 percent, labor force expands
    * Report shows some underlying strength in the economy

    By Lucia Mutikani
    WASHINGTON, May 3 (Reuters) - U.S. employment rose at a
faster pace than expected in April and hiring was much stronger
than previously thought in the prior two months, a sign of
resilience that should help the economy absorb the blow from
belt-tightening in Washington.
    Nonfarm payrolls rose by 165,000 jobs last month and the
unemployment rate fell to 7.5 percent, the lowest level since
December 2008, the Labor Department said on Friday. The job
counts for February and March were revised up by a net 114,000.
    "This bolsters the case that the U.S. economy will be able
to survive the combined headwinds of sequestration and a
deepening recession in Europe," said Scott Anderson, chief
economist at Bank of the West in San Francisco.
    Investors on Wall Street cheered the data, which beat
economists' expectations for a 145,000 jobs gain and a steady
7.6 percent reading on the unemployment rate.
    U.S. stocks rallied, with the Standard & Poor's 500 index
 and the Dow Jones industrial average closing at
record highs. The dollar vaulted to a one-week high against the
yen, while Treasury debt prices tumbled. 
    Payrolls rose by 138,000 jobs in March, 50,000 more than
previously reported, and job growth for February was revised up
by 64,000 to 332,000, the largest increase since May 2010.
    But the gains last month were far below the 206,000 jobs per
month average of the first quarter, the latest evidence the
economy is cooling, even if not as quickly as earlier feared.
    Indeed, the data provided a number of signs of a loss of
momentum.
    Construction employment fell for the first time since May
and manufacturing payrolls were flat. The length of the average
workweek pulled off a nine-month high and a gauge of the overall
work effort fell.
    Economists pin the slowdown largely on higher taxes that
took hold at the start of the year and $85 billion in federal
government spending cuts, known as the sequester, that went into
effect at the beginning of March. Economies overseas have also
weakened, cutting into U.S. export growth.
    While the U.S. economy grew at a 2.5 percent annual pace in
the first quarter, data on construction spending, retail sales
and trade suggested it ended the period with less speed.
    Further, factory data for April imply the economy braked
further at the start of the second quarter, a thesis supported
by a report on Friday that showed the pace of growth in the
services sector in April was the slowest in nine months.
 
    "We are probably going into a second-quarter soft patch, but
it's not something that's going to derail the recovery," said
Julia Coronado, chief North American economist at BNP Paribas in
New York.
 
 
    
    FED STILL IN PLAY
    The 0.1 percentage point drop in the jobless rate reflected
a gain in employment, rather than people leaving the workforce.
    Indeed, more Americans entered the workforce than in any
month since October. The labor force participation rate - the
share of working-age Americans who have a job or are looking for
one - held steady at a 34-year low of 63.3 percent.
    While the pace of hiring was stronger than expected in
April, it remained below the roughly 300,000 jobs a month that
economists say are needed over a sustained period to put a
significant dent in unemployment.
    While the jobless rate has dropped 0.4 percentage point
since January, employment is still 2.57 million jobs below where
it stood in December 2007. At April's job growth pace, it would
take about 16 months to make up that lost ground.
    About 21.9 million people are either unemployed, working
only part-time although wanting full-time work, or want a job
but have given up the search.
    Economists said the data did not appear strong enough to
dissuade officials at the Federal Reserve from pressing forward
with their bond-buying stimulus, given the immense slack still
in the labor market. It did, however, dampen budding speculation
the U.S. central bank might step up its purchases.
    "It probably cools any expectations that the Fed is going to
increase the asset purchases, especially with the unemployment
rate declining," said Raymond Stone, chief economist at Stone &
McCarthy Research Associates in Princeton, New Jersey.
    A Reuters survey of economists at financial institutions
that deal directly with the Fed found 11 of these so-called
primary dealers expect the U.S. central bank to continue asset
purchases into 2014, while just four saw the program ending this
year. 
    
    GOVERNMENT JOB CUTS WEIGH
    All the job gains last month were in the private sector,
which added 176,000 new positions. Gains were led by a rebound
in retail employment, which had dropped in March after eight
straight months of increases. Retail payrolls rose 29,300.
    Temporary help, a harbinger of future hiring, increased by
the most since February. It has now risen for seven straight
months.
    "That tells me payroll growth is going to continue to be on
a decent pace," said Stone. 
    In a surprise, the construction sector shed 6,000 workers
after 10 straight months of gains. Increases in residential
construction were offset by declines in jobs for nonresidential
builders and other construction workers.
    Government payrolls dropped 11,000 after falling 16,000 in
March. Most of the job losses last month came from the federal
government, with big declines at the U.S. Postal Service, which
is downsizing.
    Average hourly earnings rose 0.2 percent. But with average
hours worked by private workers slipping to 34.4 hours from 34.6
hours, weekly earnings actually fell.
    "The decline in income coupled with a low saving rate does
not bode well for consumers," said Michelle Meyer, a senior
economist at Bank of America Merrill Lynch in New York.
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