A job seeker talks to an exhibitor at the Colorado Hospital Association health care career fair in Denver on April 9, 2013. REUTERS/Rick Wilking
WASHINGTON — Employment rose faster than expected in April and hiring was much stronger than previously thought in the prior two months, a sign of resilience that should help the economy bear the blow from belt-tightening in Washington.
Nonfarm payrolls rose 165,000 last month and the jobless rate fell to 7.5 percent, the lowest level since December 2008, the Labor Department said on Friday. The job counts for February and March were revised up by a net 114,000.
"This bolsters the case that the U.S. economy will be able to survive the combined headwinds of sequestration and a deepening recession in Europe," said Scott Anderson, chief economist at Bank of the West in San Francisco.
Investors on Wall Street cheered the data, which beat economists' expectations for a 145,000 jobs gain and a steady 7.6 percent reading on the unemployment rate.
U.S. stocks jumped, with the Standard & Poor's 500 index and the Dow Jones industrial average rising to intraday record highs. The dollar rallied against the yen, while Treasury debt prices fell.
Payrolls rose by 138,000 jobs in March, 50,000 more than previously reported, and job growth for February was revised up by 64,000 to 332,000, the largest gain since May 2010.
But the gains last month were far below the 206,000 jobs per month average of the first quarter, the latest evidence the economy is cooling, even if not as quickly as earlier feared.
Indeed, the report offered a number of signs of a slowing in the economy's momentum.
Construction employment fell for the first time since May and manufacturing payrolls were flat. The length of the average workweek pulled off a nine-month high and a gauge of the overall work effort fell.
The economy has been hit by higher taxes and $85 billion in federal government spending cuts, known as the sequester.
While the economy grew at a 2.5 percent annual pace in the first quarter, data on construction spending, retail sales and trade suggested it ended the period with less speed.
Further, factory data for April implied the economy continued to lose momentum at the start of the second quarter, a thesis supported by a report on Friday that showed the pace of growth in the services sector in April was the slowest in nine months.
"While things may not be as bad we thought, the economy has certainly slowed," said David Berson, chief economist at Nationwide Insurance in Columbus, Ohio.
FED STILL IN PLAY
The 0.1 percentage point drop in the jobless rate reflected a gain in employment, rather than people leaving the workforce.
Indeed, more Americans entered the workforce than in any month since October. The labor force participation rate - the share of working-age Americans who have a job or are looking for one — held steady at a 34-year low of 63.3 percent.
While the pace of hiring was stronger than expected in April, it remained below the roughly 300,000 jobs a month that economists say are needed over a sustained period to put a significant dent in the jobless rate.
Economists said the data did not appear strong enough to dissuade officials at the Federal Reserve from pressing forward with their bond-buying stimulus, although it dampened budding speculation the U.S. central bank might step up its purchases.
"It probably cools any expectations that the Fed is going to increase the asset purchases, especially with the unemployment rate declining," said Raymond Stone, chief economist at Stone & McCarthy Research Associates in Princeton, New Jersey.
All the job gains last month were in the private sector, which added 176,000 new positions. Gains were led by a rebound in retail employment, which had dropped in March after eight straight months of increases. Retail payrolls rose 29,300.
Temporary help, a harbinger of future hiring, increased by the most since February.
"That tells me payroll growth is going to continue to be on a decent pace," said Stone.
In a surprise, the construction sector shed 6,000 workers after 10 straight months of gains. Residential construction has been marching higher and the pullback in jobs could be the result of cold weather in April.
Government payrolls dropped 11,000 after falling 16,000 in March. Most of the job losses last month came from the federal government, with big declines at the U.S. Postal Service, which is downsizing.
Average hourly earnings rose 0.2 percent, even though hours worked slipped to 34.4 hours from 34.6 hours. The decline in hours, which economists blamed on furloughs at government agencies, will constrain earnings growth.
Over the past 12 months, average hourly earnings rose a modest 1.9 percent.