Experimental feature

Listen to this article

Experimental feature

The pace of US job growth bounced back last month from a weak performance in March, while the jobless rate dipped to its lowest level since 2007, underscoring the Federal Reserve’s view that the economy’s choppy first-quarter performance was probably a blip.

The US economy added 211,000 jobs in April, the labour department said, compared with Wall Street expectations of 190,000. Payrolls for March were revised down to a gain of 79,000 jobs, compared with an earlier estimate of 98,000.

The unemployment rate fell to 4.4 per cent from 4.5 per cent, significantly lower than the 4.6 per cent that Wall Street was expecting. However, that came as the labour force participation rate, a measure of the working-age population that is either employed or seeking work, dipped to 62.9 per cent from 63 per cent.

“The rebound in employment offers support to the Fed’s assertion from earlier in the week that the slowdown in activity seen in the first quarter is ‘transitory’,” said James Knightley, senior economist at ING. “This would suggest the FOMC members’ forecasts that they will hike rates by 25 [basis points] on two, possibly three more occasions this year, still holds”.

Gus Faucher, chief economist at PNC, added that “the US job market is in solid shape,” with the economy “approaching full employment”.

Still, growth in average hourly earnings cooled to a year-on-year rate of 2.5 per cent, from 2.6 per cent in the previous month. That was the weakest pace since August 2016.

“These are all still mediocre numbers but the continued fall in the unemployment rate is really laying the groundwork for a move higher in wages,” said Peter Boockvar, chief market analyst at The Lindsey Group, referring to the wage growth figures.

Wall Street’s initial reaction to the mixed data was muted. The yield on the policy-sensitive two-year Treasury note was little changed at 1.31 per cent. The dollar index, a gauge of the buck against half-a-dozen peers, slipped by 0.1 per cent.

Economic reports covering the first quarter were mixed, with survey data frequently painting a rosier picture than hard data. Growth during the first three months of the year slowed to the lowest level since 2014, while the most recent reading on consumer prices came in shy of expectations.

Despite the mixed economic data, the Fed said this week that the first-quarter weakness was probably “transitory”, sending expectations that it will raise interest next month zooming higher.

Indeed, the odds of a rate rise in June that are implied by federal funds futures contracts, rose to almost 100 per cent, according to Bloomberg data, from 93.8 per cent on Thursday, and 69.7 per cent at the start of the week.

Get alerts on US employment when a new story is published

Copyright The Financial Times Limited 2019. All rights reserved.

Comments have not been enabled for this article.

Follow the topics in this article