Back in Business: Jobs Picture Brightens in April
Job creation accelerated in April, with the U.S. economy adding 165,000 new positions and the unemployment rate edging lower, quelling worries of a spring slowdown.
New figures from the Bureau of Labor Statistics indicated that a light March payrolls report may have been an aberration, as higher taxes and reduced spending due to the fiscal stalemate in Washington failed to deter growth.
The unemployment rate edged lower to 7.5 percent, due partly to the jobs gains and to a labor-force participation rate that remains at a 35-year low. An alternative rate that also counts those who have quit looking or are underemployed rose to 13.9 percent.
Job gains were concentrated primarily in the professional and business services sectors, with 73,000, and bars and restaurants, which added 38,000. Retail also added 29,000 jobs.
"It's not great, not disastrous, just kind of an in-the-middle number," said Bob Damon, president of executive recruiting firm Korn/Ferry International.
He noted that the hiring is coming from small-and mid-cap companies that are outpacing larger firms, which are "still in stall mode."
"What's really fueling it is the small- and mid-cap world where innovation is really at the forefront," Damon said. "What we're looking for is the Fortune 500 (companies) to rebound. Once we see that going on, then we'll start to see real job creation in the country."
Indeed, the report showed challenges remain for the labor market.
The average work week declined by 0.2 hours to 34.4 hours, while wages rose 4 cents to $23.87.
"In sum, what we got in today's report is a fair reflection of what we have in today's economy: Mediocre growth supported by mediocre jobs growth in industries paying generally mediocre salaries," said Steve Blitz, chief economist at ITG.
Economists had been estimating tepid payroll growth of just 150,000 for the month.
"The job market looks better than expected despite the sequester or issues like the rising cost of providing health care benefits," said Kathy Bostjancic, director of macroeconomic analysis for the Conference Board.
"The concern should be that sustaining this pace of hiring might prove difficult through the spring and summer months, as other key data signal that another spring swoon appears to be underway," she added. "Consumer spending power is rising slowly and sentiment is still very weak."
Stocks, which have ripped higher in 2013 thanks for aggressive Federal Reserve policy, took cheer from the report and rallied strongly. The Standard & Poor's 500 crossed the 1,600 barrier, while the Dow industrials are making a run at 15,000.
The payrolls beat comes as most economic indicators have shown consumers under increasing pressure and unwilling to spend. However, those trends may be temporary if hiring can continue to improve.
Revisions from previous reports were substantial, with March's 88,000 jacked up to 138,000. The February report soared from an originally strong 268,000 to 332,000.
The report could raise new questions about Fed policy.
Just two days ago the central bank expressed concern over Washington's inability to resolve its fiscal issues and the effect that spending cuts would have on growth.
The Fed is pumping $85 billion a month into the economy through purchases of Treasurys and mortgage-backed securities, but could face calls to start unwinding efforts that have taken the central bank's balance sheet to $3.3 trillion.
The Fed has said it will not raise interest rates until unemployment declines to 6.5 percent and inflation, currently at 1.5 percent, hits 2.5 percent.
"While the top line numbers are enough to convince people the economy is not about to decelerate, the detail should be enough to convince the Fed that while its current course of policy may not be generating the sector growth they want they are going to keep at it to least keep up the growth we have," Blitz said.