Jobs Data Erase Fears That Recovery Has Run Out of Gas
And just like that, worries about a spring slump fade.
In a surprise reversal of recent downbeat economic data, the government reported Friday that the jobs market is substantially healthier than many believed, even as other recent data point to a marked slowdown in April.
Employment rose faster than expected last month, pushing the jobless rate to a four-year low of 7.5 percent. Nonfarm payrolls rose 165,000 last month, the Labor Department said on Friday. Stock markets cheered the news as the Dow Jones industrial average crossed into record territory above 15,000.
The jobs report "will go a long way toward soothing fears of another spring slowdown," said Paul Ashworth, chief U.S. economist at Capital Economics. "All things considered, 165,000 isn't the biggest monthly gain in payrolls you'll ever see, but it's enough to assuage concerns that the economy had stalled again."
The report also wiped off the books previously reported data which had pointed to a sharp hiring slowdown in March. The revised numbers showed March payrolls adding 138,000, about 50,000 more jobs than previously reported. February's job count was revised upward to 332,000, the largest monthly gain since May 2010.
"What spring swoon?" said Jim O'Sullivan, chief U.S. economist at High Frequency Economics. "The message is that last month's weaker-than-expected report was largely a false alarm."
Payroll gains are now averaging about 200,000 a month, up from last year's pace of 183,000 and enough to maintain a steady drop in the unemployment rate.
Taken together, the report showed continued, if sluggish, improvement in the U.S. job market. The unemployment rate now stands at 7.5 percent, the lowest level since December 2008.
Last month's drop in the jobless rate came as more Americans found jobs—not, as in some months since the recession ended, because of a decline in the number of people looking for work.
The sharp reversal in the job numbers brought a swift reversal in investor's mood about the economic outlook. Shortly after Friday's report was released, investors stampeded into stocks, pushing market indexes to new highs. The Dow and the broader S&P 500 index were up more than 1 percent.
To be sure, some sectors of the economy are doing better than others. Separate data last month pointed to a sharp slowdown in manufacturing output and orders for durable goods. The recovery in construction has also been uneven, with some regions of the country rebounding more quickly than others
Weakness in those sectors was confirmed by Friday's jobs numbers. Construction employment weakened and manufacturing payrolls in April were flat.
Companies large and small report that they are still leery of hiring until they get a better sense of where the economy is headed. Those fears have been heightened for companies that do business with the federal government, which is in the early stages of an $85 billion, across-the-board spending cut known as the sequester.
Instead of hiring workers to keep up with growth in demand, employers continue to rely heavily on part-time workers, adjusting their hours as needed. In April, nearly 8 million people who wanted full-time work were employed only part time, about 278,000 more than in March.
Some sectors continue to produce healthy job gains, though. The professional and business services categories added 73,000 jobs in April—or more than half a million in the past 12 months. Restaurants, bars and food service companies hired 38,000 more people last month; job growth in that industry has averaged 25,000 per month for the past year. Retailers added 29,000 jobs in April, up from the average pace of 21,000 jobs per month.
And demand for health care workers remains strong. About 19,000 jobs were created in April, after averaging 24,000 a month.
The outlook also continued to improve last month for those out of work the longest. The number of Americans who have been without a job for 27 weeks or more fell by 258,000 to 4.4 million, and their share of the unemployed fell by 2.2 percentage points to 37.4 percent. In the past year, the number of long-term unemployed has dropped by 687,000.
The surprising strength in Friday's jobs data will likely renew speculation about the Federal Reserve's aggressive policy of pumping $85 billion of fresh cash into the economy every month to spur economic growth and keep the job market expanding.
Lower rates have helped prod the wobbly economic recovery by shrinking interest payments for government, businesses and consumers and encouraging them to borrow more to invest and spend. Low mortgage rates have also helped spur home buying, which has lifted home prices in many regions of the country, adding to household wealth and supporting consumer spending.
(Read More: Mortgage Applications Rose Last Week as Rates Fell)
Fed policymakers met earlier this week and voted to maintain their easy-money policy for as long as necessary. But the central bankers have said they will begin throttling back their effort to keep interest rates low as the jobless rate approaches 6.5 percent.
Most investors and other Fed watchers have assumed that meant interest rates would remain at historically low levels at least through next year. If the jobless rate continues to fall at the same pace it has since it peaked at 10 percent in September 2009, it would hit the 6.5 percent mark in August 2014.