The U.S. economy accelerated its rebound from a recent soft patch as unemployment unexpectedly fell to a fresh 49-year low amid surprisingly strong hiring and cooler-than-projected wage gains, suggesting the hot labor market can extend its run.
Payrolls climbed by 263,000 in April after a downwardly revised 189,000 advance the prior month, according to a Labor Department report Friday that exceeded all estimates in a Bloomberg survey. The jobless rate unexpectedly fell to 3.6 percent while average hourly earnings growth was unchanged at 3.2 percent, below projections.
U.S. stock futures extended gains after the report. The fed funds futures market briefly showed a slight reduction in odds for a Federal Reserve rate cut this year, before returning to where it was prior to the data, following calls from President Donald Trump and others for a reduction to support the expansion. Policy makers reiterated their patient stance this week as Chairman Jerome Powell cited “very strong job creation’’ while noting weaker inflation.
“It’s clearly telling you this economy is still chugging along very nicely,” Torsten Slok, chief economist at Deutsche Bank Securities, said on Bloomberg Television. “It is inflationary in the sense that wages did go up but they didn’t go up as much as we had expected.”
“Goldilocks is the best description of this,” Slok said.
The surprising overall robustness -- which didn’t reflect any surge in temporary hires for the 2020 Census, as some analysts had flagged -- follows months of broad labor market strength. While the expansion is poised to become the nation’s longest on record at midyear, economists expect a deceleration this year even after a strong first quarter.
However, the lower unemployment reading was due in part to a factor economists don’t always see as a healthy sign: The participation rate, or share of working-age people in the labor force, decreased to 62.8 percent from 63 percent.
What Bloomberg’s Economists Say
“The April jobs report provided further confirmation that the pace of hiring is recovering from its February swoon. While payroll gains are handily exceeding the threshold necessary to drive the unemployment rate lower, the drop in April -- to 3.6 percent -- is largely attributable to declining participation.” -- Carl Riccadonna and Yelena Shulyatyeva, economists Click here to read the full note
Revisions for February and March added 16,000 more jobs than previously reported, while the three-month average fell to 169,000.