US unemployment at 50-year low as hiring ramps up

The US labour market showed historic strength in April, with employers hiring at a faster pace.

US President Donald Trump speaks to workers at tool manufacturer Snap-On in Wisconsin with a US flag made out of spanners in th background. Picture: Getty

The US labour market showed historic strength in April, with employers hiring at a faster pace and the unemployment rate falling to a half-century low.

The latest numbers, however, also raise the question of whether enough workers can be drawn into the labour market to sustain the momentum of a nearly decade-long expansion.

The economy added a seasonally adjusted 263,000 jobs in April — the 103rd straight month of gains — and joblessness fell to 3.6 per cent, the lowest level since December 1969, the Labor Department said. The better hiring coincided with solid wage growth.

“The labour market is as strong as it’s been in a half-century,” said Scott Anderson, chief economist at Bank of the West. “We’re in a spot to see the expansion continue.”

Markets reacted positively to the latest report showing strength for the US economy after a rocky start to the year, with the Dow Jones Industrial Average rising 197.16 points, or 0.7 per cent. The data also are unlikely to move Federal Reserve policymakers from their wait-and-see stance that the economy isn’t cooling but is still far from overheating.

The jobs report was largely better than expected. Economists surveyed by The Wall Street Journal had projected a slower pace of hiring and for the unemployment rate to hold steady at 3.8 per cent. Job growth in the prior two months also was better than previously reported. The long jobs expansion is increasingly reaching Americans at the margins. Wage gains have strengthened in recent years, especially for workers earning the smallest pay cheques, and unemployment has fallen for those who have historically struggled, including people with lower levels of education.

Private-sector workers saw solid wage improvements in April, with average hourly earnings up 3.2 per cent from a year earlier. The annual gain in wages was stronger than the 2.8 per cent increase in April 2018 from a year earlier. Pay gains haven’t accelerated much further since year-over-year wage growth broke above 3 per cent last year for the first time in nearly a decade. Still, workers have been enjoying better pay in real terms, as average raises exceed price increases. The consumer-price index rose 1.9 per cent from a year earlier in March.

But a vexing challenge remains: employers still struggle to pull workers off the sidelines to power a growing economy at a time when more baby boomers are poised to retire. An economy’s potential growth relies on the size of a nation’s workforce and how much those workers are able to produce. There were signs that workers got more productive in the first quarter.

At the same time, economists expected strong hiring and continued wage growth to encourage Americans who hadn’t been seeking work to join the labour force. Instead, such participation was flat from a year ago, and the US workforce shrank in April. The share of people in their prime working years who had a job or were looking for one, while higher than a year ago, pulled back for the second month, cutting into recent gains.

That apparent pullback could be a measurement issue that resolves itself. The jobs report is derived from two separate surveys, one of employers and one of families, and those surveys were at odds in the latest month.

The survey of 142,000 employers, which economists find more reliable month to month, showed strong hiring. That is consistent with the idea that Americans are getting back to work in greater numbers. The survey of 60,000 households, however, reported fewer Americans were working or even looking for work. In the longer run, the data from both surveys tend to move together.

More broadly, surveys this past week from the Institute for Supply Management pointed to slower job growth for manufacturers and service-sector companies. They also suggested growth in wider economic output is poised to cool, consistent with the view of many economists for gross domestic product gains to slow after increasing at a 3.2 per cent rate during the first three months of the year.

Consumer confidence, however, improved in April, according to the Conference Board. When combined with solid wage growth, that could point to better consumer spending, the primary driver of the US economy.

So chief executives like Barbara Moran-Goodrich of Moran Family of Brands face good news — a strong job market is putting more people on the road and creating demand for her company’s auto-repair franchises. But she is also challenged to find the workers to meet that demand. Moran’s auto facilities across the nation are seeking to fill about 50 to 75 open positions. It has been particularly difficult for them to find auto-repair technicians.

Franchisees are focusing their efforts on internship and apprenticeship programs launched in recent years. So far, those hadn’t produced nearly as many skilled workers as the company needed, Ms Moran-Goodrich said.

Employment at Rockwell Automation, the Milwaukee maker of industrial equipment and technology, has increased by about 5 per cent in the past three years. The company projected it would need more workers soon, but was concerned about finding workers to operate the hi-tech equipment, chief executive Blake Moret said.

Rockwell was stepping up training, Mr Moret said.

There was still capacity to draw additional workers into the labour market, said University of Chicago economist Erik Hurst. Prime-age labour-force participation remains well below its 2000 peak, and a broader measure of unemployment and underemployment remains somewhat elevated compared with 2000.

“I think the labour force will grow,” Mr Hurst said, adding the unemployment rate could even tick up as workers are drawn in. “Especially since there’s been some response in wages, workers on the margin of working or not might consider taking a job.”