U.S. job growth fell just short of expectations in April, but the unemployment rate resumed its downward trend.
The economy added 223,000 payroll jobs in the month, slightly fewer than investors had hoped for, and the unemployment rate ticked down to 5.4 percent, according to the Bureau of Labor Statistics.
Friday’s report showed that March’s weak jobs growth was even worse than first thought, at 85,000 rather than 126,000.
Despite the modest headline numbers on Friday’s report, some details were encouraging.
The drop in the unemployment rate from 5.5 percent to 5.4 percent was driven by rising employment, not by workers retiring or quitting the job search. The labor force grew by 166,000 and the labor force participation rate, which has been driven by demographic change and economic weakness to decades-low levels, inched up from 62.7 percent to 62.8 percent.
A broader measure of underemployment, the U-6 unemployment rate, ticked down from 10.9 percent to 10.8 percent. The U-6 rate takes into account people forced into part-time work or getting irregular hours. Overall, the number of people who have had their hours cut or work part-time because they can’t find full-time work has fallen by 880,000 over the past year.
Wage growth, on the other hand, remained tepid in April. Average hourly wage growth remained relatively weak at 2.2 percent for the year through April, according to the survey of businesses. Real wage growth has been given a boost, however, by slowing growth in consumer prices in recent months, especially for oil.
The question stemming from April’s report is whether job growth is enough to outweigh a number of other indicators that have cast doubt on the U.S. economic recovery in the minds of policymakers.
Most notably, economic output growth was minimal in the first quarter, at just 0.2 annually, according to the Bureau of Economic Analysis’ first estimate of gross domestic product growth released last week. A widening trade gap, driven by a rising dollar, reported this week suggests that growth may even have been negative for the quarter.
That question is particularly acute for Chairwoman Janet Yellen and other members of the Federal Reserve, who must determine in the coming months if the U.S. economy is securely on a path to full recovery, allowing them to tighten monetary policy.
In its most recent policy announcement, the Fed said that it would raise its short-term interest rate target from zero for the first time since 2008 after further improvement in the jobs outlook and when it was confident that inflation was returning to its 2 percent long-term goal.
Wage growth Friday’s report was below what the Fed sees as in line with rising inflation. While job growth been persistent if modest, the remaining question is how far employment can grow. At 59.3 percent in April, the employment-to-population ratio remains far below the roughly 63 percent it was before the recession. It’s unclear just how much of that difference is because of the aging of the U.S. population into retirement and how much is due to economic weakness that can be addressed.
Job growth for April was particular strong in support services, healthcare, and construction. The recent collapse in oil prices wreaked havoc on mining employment, with the sector losing 15,000 jobs in April and nearly 50,000 since the start of the year.
One positive development from the household survey was that the unemployment rate for black Americans dipped significant to 9.6 percent, falling below 10 percent for the first time during the recovery. The unemployment rate for white Americans was 4.7 percent, while for Hispanics it was 6.9 percent.
