Published: Sun, May 06, 2018
Markets | By Josh Butler

Manufacturing Strong as Unemployment Rate Falls to 3.9 Percent

Manufacturing Strong as Unemployment Rate Falls to 3.9 Percent

The report said the Federal Reserve predicted that unemployment rate would be 3.8 per cent by the year-end and since it is already 3.9 per cent, the eventual unemployment figure could be even less, leading to an even quicker rise in interest rates.

Still, the jobs growth in April was lower than expected - economists in a Bloomberg survey had predicted 193,000 new jobs.

"Fed officials can rest easy that there is not any wage-based inflation on the horizon", said Chris Rupkey, chief economist at MUFG in NY.

April's payroll gain reflected a 168,000 increase in private employment, compared with the median estimate for 190,000. Only the 1990s expansion was longer.

The number that really pops out from the latest data release on the USA labor market, however, is the unemployment rate.

However, a significant bump in pay has yet to be seen across most industries.

The African-American unemployment rate dropped to 6.6 percent.

"There's still hundreds of thousands of more people who will enter the workforce", he said.

Critics say it's "the wrong way to get to 3.9 percent".

The drop in the unemployment rate, which had held steady for six months, was hailed by President Donald Trump, who has taken credit for the robust health of USA economy. The last time it was lower than that was 1969.

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The BLS report also found that average wages increased by four cents and now sit at $26.84 for the month of April. They grew 2.6% from a year earlier, slightly below economists' expectations. "It means borrowing costs will be moving higher for typical consumers".

The Federal Reserve is likely to view the stable rate of pay as a sign of support for its cautious strategy of raising USA interest rates.

The unemployment rate is an imperfect measure of economic health.

Market reaction: The Dow Jones Industrial Average DJIA, +1.39% and Standard & Poor's SPX, +1.28% surged in Friday trades, with the Dow up more than 350 points.

In April, employment in mining increased by 8,000, with most of the gain occurring in support activities for mining (+7,000).

Manufacturing added 24,000 jobs, up from a gain of 22,000 in March. Over the last 12 months, that sector has expanded by 518,000 jobs.

Despite the healthy increase in employment in manufacturing, nonfarm payrolls were up by just 164,000 in April.

"Sooner or later, we're going to be running out of workers if the recovery continues, and that will put more upward pressure on wages", Krueger, a Princeton University professor, said on Bloomberg Television.

President Trump celebrated the report. The optics of a 3.9% unemployment rate (i.e., breaking through the 4.0% barrier) carry that perception an important step further.

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