Posted on: Saturday, May 7, 2005
Jobless rate steady but hiring up
By Nell Henderson
Washington Post
WASHINGTON — Job growth surged last month as retailers, builders, healthcare providers and other employers expanded their payrolls, suggesting that businesses remain upbeat about the economy's future despite its recent softness.
The nation's jobless rate held steady at 5.2 percent in April as employers hired 274,000 additional workers, the Labor Department reported yesterday, while also boosting its job counts for February and March.
Employers have added an average 211,000 jobs a month this year, a pace that should bring the jobless rate down over time, and a pick-up from the average last year of 183,000 a month.
The April jobs report appeared to reflect the economy's underlying good health, even though it followed a string of other reports showing the expansion had lost steam in recent months, analysts said. Economic growth slowed in the January through March quarter, to a 3.1 percent annual rate, the lowest in two years, as both businesses and consumers pulled back on spending, energy costs rose and the trade deficit widened.
The firm labor market "does suggest that the economy may not be as weak as many previously expected," said Richard Yamarone, chief economist at Argus Research Corp. "If businesses are truly worried about sluggish demand, lofty energy prices and higher interest rates, they wouldn't engage in the costly practice of adding workers at such an elevated rate."
Stock prices were little changed after the report was released. Stronger hiring could mean bigger profits for firms that benefit from the extra spending, or smaller profits if the Federal Reserve raises interest rates more aggressively to keep inflation in check.
Fed officials raised their benchmark short-term interest rate to 3 percent Tuesday and signaled they plan to move it gradually higher in the months ahead. In a statement issued after their meeting, the policymakers noted both the spending slump and rising inflation pressures.
The jobs report is likely to confirm the Fed's belief that the economic expansion remains solid and self-sustaining, a situation in which rising employment creates more demand, prompting firms to hire more workers. That means the economy no longer needs the added stimulus of very low interest rates, justifying the Fed's plan to raise rates to contain inflation.
The Fed wants the labor market to keep improving after several years of job losses followed by sluggish employment growth and lackluster wage gains. Employers have been adding workers every month since June 2003, but it wasn't until January of this year that they had restored all the jobs lost during the 2001 recession and initial "jobless recovery" that followed.
With job growth now steady and strong, Fed officials have turned their attention to the question of whether rising labor costs — including both wages and benefits — will fuel more inflation.
Another Fed interest rate hike in June is "a virtual certainty," said Peter Kretzmer, senior economist for Bank of America Corp., echoing the sentiments of other analysts.
The April payroll gains were widespread, with increases in finance, real estate, trucking, telecom, construction, and the movie and recording industries. State and local governments also added workers.
Manufacturers, airlines, publishers, gas stations and the federal government were among the employers who cut jobs.
Average weekly earnings for most workers rose by $4.88 to $542.40. Average hourly earnings rose to $16, up a nickel, for private production and nonsupervisory workers, who account for 80 percent of the work force.
The unemployment rate for white workers was unchanged in April at 4.4 percent. Black unemployment rose to 10.4 percent from 10.3 percent in March, while Latino unemployment rose to 6.4 percent from 5.7 percent.
