US businesses send recovery signals
America’s job situation is on the fastest pace in April in more than two years and jobless rate plunged. On the other hand GDP, the Gross Domestic Product grew in the first quarter of 2014 only 0.1 %
Nonfarm employment grew in April and seasonally adjusted to 288000 reports the US Labour Department. That marked the best month of job creation since January 2012 and the second best months since the economy emerged from recession in mid-2009.
Revised figures also showed payrolls grew faster in February and March than previously estimated, boosting prior estimates by 36000 jobs combined. The economy added 203000 jobs ijn mach, up from initially reported 192000, and 222000 in February, up from 197000.
The jobless rate, obtained from a separate survey of households, fell to 6.3 (6.7) %, hitting the lowest level since September 2008. But in a worrisome sign, the rate declined because the overall labour force fell sharply. Fewer Americans re-entered the labour market after previously dropping out, sending the labour force participation rate back to a three decade low of 62.8 %.
According to Jim Baird of Plante Moran Financial Advisors, “Employers are hiring at a robust pace, seemingly shrugging off the weakness in recent months. It appears that employers have bought into the idea that the weak stretch was weather driven and would pass with time. Given April’s strong job gains, it looks increasingly likely that growth should pick up sharply in the second quarter.”
Job growth slowed at the end of last year, and averaged just 1140’00 in December and January. But the U.S. has now posted three consecutive months of job creation above 200000. The private sector provided the bulk of job growth, with firms adding 273000 jobs. Government jobs also grew by 15000, a sign years of budget cuts have given way to at least some growth in the public sector. The private job contributions versus Government jobs can be had from the following chart.
A broader measure of unemployment, including workers stuck in part-time jobs because they cannot find full-time work, and discouraged Americans who gave up looking, fell to 12.3 (12.7) % in April. Overall, the labour market remains rather sluggish, amid a historically weak economic recovery. The jobless rate is still above the pre-recession level of about 5 %. The share of working age Americans in the labour force – meaning those in jobs or actively looking for work – stands at the lowest level since the late 1970s.
The faster pace of job creation is failing to transfer into stronger wage gains for workers. The average hourly wage for private sector workers failed to budge in April, remaining at USD 24.31, or just 1.9 % above the year earlier level. The average workweek remained also unchanged at 34.5 hours.
Job gains occurred across the economy. Professional and business services led growth with 75000 new jobs. Temporary service jobs grew with 24000. Retail jobs climbed with 35000 and construction jobs with 32000. The health care sector added 19000, but manufacturing employment remained flat.
Other recent measures suggest the economy is picking up speed. A key measure of manufacturing activity rose to the highest level in four months in April, the Institute for Supply Management reported last Thursday. Consumers stepped up spending in March at the fastest pace in almost five years according to the U.S. Commerce Department.