U.S. job growth continues to be solid in April, jobless rate falls to 3.9 pct

Job growth in the U.S. continues to be strong in April in spite of the disappointment seen in the headline figure. The non-farm payrolls rose 164k in the month, as compared with consensus expectation of a rise of 193k. Revisions over the prior two months saw an additional 30k jobs tacked onto first quarter job growth, noted TD Economics.

The goods producing sector added 49k jobs in April, mainly because of ongoing strong hiring in the manufacturing sector, while hiring in the construction sector improved. The private services sector added 119k jobs, with professional and business services, and the education and health industries added most to the sectoral aggregate.

Meanwhile, the jobless rate dropped to 3.9 percent after remaining unchanged at 4.1 percent for five straight months. The labor force dropped by 236k, the second straight month of decline. Therefore, the labor force participation rate dropped by one tenth of a point to 62.8 percent, while that of the core-working aged participation rate dropped by the same amount to 82 percent.

The participation rate for core-working aged men has risen to 89.3 percent and is back to its post-crisis peak, but the volatility in core-working aged women’s participation rate is keeping a lid on the aggregate.

In the meantime, wage growth slowed in April, rising only 0.15 percent. On a year-on-year basis, average hourly earnings remained stable at 2.6 percent.

Even if weather-related volatility at the beginning of the year might still be unwinding, April’s payrolls imply that the U.S. job market continues to be fairly hot, noted TD Economics in a research report. With the American economy performing better than expected in the first quarter and expected to expand at a 3 percent average rate in the next few quarters, wage pressures are likely to build gradually. There are wide signs that both wage and prices are heating up, and a stimulus-fuelled economy should only encourage further firming in these measures.

“So long as downside risks fail to materialize, we anticipate that the FOMC is on pace to continue to raise rates. We expect two more 25 basis point hikes in 2018”, added TD Economics.

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