May 2 - The dramatic improvement in the monthly jobs data caught the market off guard- and put it on guard for the possibility of a sooner-than-expected interest rate hike by the Federal Reserve. Bobbi Rebell reports.
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Job growth grew at its fastest pace in more than two years in April- 288,000 new jobs created. The unemployment rate down dramatically to 6.3 percent, raising new hopes that economic activity picked up the pace, as the weather got better this spring.
Wells Fargo Chief Economist John Silvia:
SOUNDBITE: JOHN SILVIA, CHIEF ECONOMIST, WELLS FARGO (ENGLISH) SAYING:
"I think what will happen is people start raising their economic forecast in terms of overall GDP, but they also might start changing the timing of the Fed in bringing forward a change in the Federal Funds rate; perhaps as early as the second quarter of 2015, rather than perhaps what we expected was the third quarter of 2015. And so it's that delicate balance of better growth but higher rates."
That delicate balance- likely the reason for the muted response by the stock market - which barely budged on the report.
Average hourly earnings were flat- the average workweek held steady at 34.5 hours.
But part of why the unemployment rate is at lowest level in more than five years- is that fewer people are looking for work. 806,000 people left the work force last month.
White House Council of Economic Advisor's Chairman James Furman:
SOUNDBITE: JAMES FURMAN, CHAIRMAN, COUNCIL OF ECONOMIC ADVISORS (ENGLISH) SAYING:
"This particular month, it wasn't the unemployed giving up looking for jobs; it was actually some people that would normally enter the labor force not entering the labor force. We don't fully understand why that is. What we do know though, is that broader measures of unemployment that include discouraged workers and include marginally-attached workers, and included people working part-time and voluntarily, those broader measures went down as well along with the regular unemployment rate."
The gains that were seen were virtually all in the private sector- with a strong gain in construction.
But the kinds of jobs that are being created is a concern for Wharton Professor Chris Geczy:
SOUNDBITE: CHRIS GACZY, PROFESSOR, WHARTON SCHOOL, UNIVERSITY OF PENNSYLVANIA (ENGLISH) SAYING:
"They tend to be short term jobs. They are more retail oriented than sort of structurally oriented, the kinds of jobs that at the margin, for example, could be done by part-time workers. When the Fed looks at long term unemployment and the structure of labor employment in the United States that shift really does matter in the long run. It's the kind of thing that tends to potentially mute the otherwise good numbers that we've seen."
The jobs report joins other recent upbeat data- including consumer spending and industrial production- that confirm the almost non-existent first quarter growth was indeed- because of the weather.
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