Jobs Report Fuels Hopes Economy Has Hit Bottom
Fewer U.S. jobs were lost in April than economists feared and the unemployment rate unexpectedly improved, raising hopes an economic downturn was not gathering steam as the second quarter opened.
The Labor Department said on Friday that 20,000 jobs were shed last month, far fewer than the 80,000 that economists had anticipated.
The national unemployment rate fell to 5 percent from 5.1 percent in March.
"The economy is just barely treading water," said Richard Yamarone, chief economist for Argus Research in New York, after the jobs figures were issued.
"It's not imploding but it's not desirable either." Stock investors were heartened by the jobs report, driving equities prices higher, but bond prices fell on the belief it raised chances the Federal Reserve will be able to extend a pause in its rate-cutting campaign.
Stocks rallied on the jobs report, though the gains were pared in late morning. The dollar's value gained against other key currencies on the possibility that interest rates will not keep falling. Oil prices also rose on speculation the US economy won't slow further, boosting demand for crude.
A report at mid-morning from the Commerce Department, showing a stronger-than-expected 1.4 percent rise in March factory orders, added to the positive market tone. Forecasts had called for only a slight 0.2 percent rise in March orders.
The report also showed, though, that inventories of unsold manufactured goods climbed to the highest level since the department started records in 1992.
Attention was focused on the April jobs report, however, since it is one of the first looks at second-quarter performance and came amid lingering fears the economy is at heightened risk of slipping into recession.
April's job reductions followed upwardly revised losses of 81,000 jobs in March and 83,000 in February. Employers also cut 76,000 jobs in January.
Though the losses in jobs last month were less than forecast, they nonetheless represent continued deterioration in hiring prospects.
The four-month string of monthly losses is the longest since a five-month stretch in 2003, when the economy was still in a so-called jobless recovery from the last recession in 2001.
In an interview on CNBC, Commerce Secretary Carlos Gutierrez described the report as "bittersweet" since it still reflects a weaker job environment.
"I'm just so glad that we are right in the middle of sending out economic stimulus checks to consumers right now that should spur activity," he said.
The Bush administration began making direct deposits this week of up to $600 for individuals and $1,200 for couples as part of an economic stimulus program approved by Congress earlier this year.
Analysts said the moderation in the pace of job losses added to hopes that the economic downturn may be less severe than thought, provided that a credit-market seizure can be avoided.
"What you get a sense of is that people have been coming into this in recent months with the idea that this was a horrendous recessionary calamity, and I think what we're coming to find out is that this looks more like a mid-cycle slowdown," said Jim Paulsen, chief investment officer for Wells Capital Management in Minneapolis.
John Silvia, an economist with Wachovia Bank in Charlotte, N.C., said the jobs data gave the Fed some breathing-room to assess the impact of substantial rate cuts it already has made.
"I think the employment decline was less than expected and consistent with a modest slowdown in the U.S. economy, possibly a recession, and I think it will allow the Fed time to look at the data going forward," Silvia said.
Just before the April employment figures were issued, the Fed announced fresh action to add liquidity to credit markets, increasing the size of some cash auctions for financial institutions as well.
The Labor Department said 61,000 construction jobs were lost in April, the largest number for that sector since 103,000 were cut in February 2007.
The department said since peaking in September 2006, some 457,000 construction jobs have been lost.
Goods-producing businesses cut 110,000 jobs in April, the largest number of job reductions since January 2002, after trimming 88,000 in March.
But service industries added 90,000 jobs -- the most since last December -- with most of them coming in the health care and professional technical services sectors.
Both the number of hours worked and overtime hours weakened slightly in April from March, a sign employers were making every effort to keep a tight lid on employment costs.