With the jobs created in April, the U.S. economy is at its lowest unemployment level since 2008. Not only is the jobless rate falling, the number of Americans who are underemployed is shrinking, too. U.S. employment rose by 223,000 jobs last month, nudging the unemployment rate to 5.4 percent, the Labor Department said Friday.
The numbers were welcome news. The economy created a downward-revised 85,000 jobs in March.
Meanwhile, the portion of part-time workers who would prefer to work full time dipped to 10.8 percent in April from 10.9 percent the previous month, an encouraging sign that also has implications for future wage growth.
“It’s discouraged workers coming back into the labor force and actually finding jobs, and part-time workers finding full-time jobs,” said Gregory Daco, chief U.S. economist at Oxford Economics. “It’s a sign that the broader labor market is doing better and that is one of the main reasons we expect the pace of wage growth to accelerate.”
Here are two main takeaways from Friday’s U.S. jobs report:
1. The U.S. Economy Is Picking Up Steam
U.S. job creation was widespread across many sectors in April, including a rebound in construction jobs following harsh winter weather that contributed to slower economic growth in the first three months of the year. There also were increases in service jobs, including the retail sector and food and beverage. The biggest laggard was the mining sector (which includes the oil and gas industries), which has experienced layoffs and a downturn in hiring related to the precipitous drop in oil prices. So far in 2015, employment across the sector has declined by 49,000 jobs, which more than erases the 41,000 positions gained in all of 2014.
Still, April’s report bodes well for the overall U.S. economy, Daco says. “It’s a sign that the weak reading in March was an outlier, and if anything, it brought job growth back in line with economic momentum,” he said.
Stuart Hoffman, chief economist at PNC Financial Services Group, agrees. “It did support our view that first-quarter GDP was an aberration, or a temporary weakness in the economy, and we’ll get a pretty good rebound in the economy in the spring.”
The U.S. economy grew slower than expected in the first three months of 2015, due to harsh winter weather, a strong dollar and a slowdown in shipping.
2. The Fed Is Unlikely To Raise Interest Rates Until September
Hoffman referred to the April employment figures as a “Goldilocks" report. It eases economists’ fears that a slowdown in the first-quarter slowdown won't spill over into the second quarter.
But the report also wasn’t strong enough for the U.S. Federal Reserve to raise interest rates at its next policy meeting in June.
“That’s still clearly off the table,” Hoffman said. “But it probably means the Fed will have enough confidence in the economy to start lifting rates in September.”
Economists broadly predict that September will be the time when the Fed looks at raising rates, because the temporary factors that held the economy back in January, February and March will have long dissipated, “meaning stronger growth in the second half of this year,” Daco said.