Published: Sun, May 06, 2018
Finance | By Cynthia Curry

US job growth picks up, unemployment rate falls to 3.9 per cent

US job growth picks up, unemployment rate falls to 3.9 per cent

USA job growth increased less than expected last month, as the unemployment rate fell to more than a 17 year low of 3.9 per cent as some jobless Americans left the workforce.

"Today's jobs report reinforces a number of themes we have emphasized: (1) USA growth is set to accelerate in Q2, even as the rest of the world may be slowing, (2) the unemployment rate is likely to drop faster than Fed expectations, and (3) despite strong economic growth and a low unemployment rate, inflationary pressure remains muted", Citibank said. More tellingly, the unemployment rate fell to 3.9 percent, the lowest since December 2000. It can drop if more people get jobs; it can also drop because fewer people are looking for work.

Before that, less than one-third of the months between 1948 and January 1970 saw lower or equivalent rates, according to the Bureau of Labor Statistics.

Economists say the tightening labor market should accelerate wage growth.

But average hourly earnings could be understating wage inflation.

Average hourly pay in the private sector rose 2.6% year-on-year to $26.84 while the average hourly wage in the private sector increased by only 0.1% over the month.

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Inflation has shown signs of accelerating slightly, eroding some of the potential wage growth. We read the employment disappointment as largely noise, especially considering net upward revisions over the last two months, although it could be indicative of growing labor shortages. Though the decline in the labor force accounted for the drop in the unemployment rate last month, labour market slack is diminishing. The rate for African Americans fell to 6.6 percent, the lowest level on record.

Wholesaler and government were the only sectors to shed jobs. However, that has failed to translate into higher wages, at least in a meaningful way. Monthly job gains have averaged about 200,000 this year, more than the roughly 120,000 needed to keep up with growth in the working-age population. The number of service-producing jobs grew by 119,000 in April with the largest number of these jobs coming from professional and business services, up 54,000, and education and health services, up 31,000.

Barrera adds that it is also younger people who are new to the workforce that are seeing more opportunities as well. Eight years ago, the jobless rate was 10 percent.

The NFIB report said 57 percent of responding small businesses said they were hiring or planning to hire in April, up from 53 percent in March. Historically, employment has dropped below 4 percent just before a slowdown or crash, as the Washington Post reported.

The US central bank on Wednesday left interest rates unchanged and said it expected annual inflation to run close to its "symmetric" 2 per cent target over the medium term.

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