Strong US job growth in April has lead some economists to predict that the US jobs market is in recovery, despite a slight rise in the unemployment rate. While this has erased some fears of a double dip recession, economists caution that progress in the current recovery will be slow, and will rely on improvements in other areas, such as labor income and consumer spending. See the following article from Money Morning for more on this.
The U.S. job market exceeded estimates by adding 290,000 jobs in April, the Labor Department reported Friday. The biggest upswing in four years indicates a strong upward trend in private sector hiring and a positive outlook for the recovery.
Experts say the job data shows that the recovery is making progress and should erase fears of a double dip recession – even if that progress is slow.
“The jobs report underscores this is a resilience of the recovery,” said Lakshman Achuthan, managing director of Economic Cycle Research Institute. “When the business cycle is in an upswing, it starts to feed on itself, and the economy can withstand a pretty big shock without being tipped into a new downturn.”
The employment gain beat economists’ estimates of 190,000 with the biggest jump since March 2006, rounding out the best four-month job performance since 2000 with 1.66 million jobs added since December.
“This is a very encouraging report, supporting our call that businesses have responded, and will continue to respond, to the rebound in demand by ramping up employment growth,” economist Peter Newland from Barclays Capital told The Wall Street Journal. “This, in turn, should support labor income and consumer spending, sustaining the broader economic recovery once the temporary factors of supportive policy and the turn in the inventory cycle fade.”
A key factor showing sustained progress was a private sector jump of 231,000 jobs. Hiring spread across many industries, with business and professional services adding 80,000 positions, manufacturing up 44,000 – its biggest gain since August 1998 – healthcare adding 20,000 jobs and construction up 14,000. Construction companies continued hiring for the second consecutive month.
Both General Electric Co. (NYSE: GE) and Warren Buffet’s Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) announced job growth due to expanding business units.
“Private job creation was the missing link of the recovery and it now appears to be coming on stream,” wrote research firm RDQ Economics.
The report revised up nonfarm job data from previous months, showing more positive numbers than were initially calculated. The actual March job creation total was 230,000 instead of 162,000 and February jobs were up 39,000 instead of posting a 14,000 loss.
Manufacturing overtime hours have increased or stayed the same for the last 12 months and the number of temporary workers increased for the seventh straight month – both early indicators of future permanent job creation.
More People Return to Work Force
The unexpected rise in the unemployment rate to 9.9% from 9.7% was attributed to jobless people finally being lured into the job hunt and factored into the unemployment rate. The number of people reentering the work force in April was 805,000. About 550,000 of them found work and 225,000 did not.
“Of course one of the headlines is that the unemployment rate rose, but the rise was more than accounted for by a surge in the labor force,” James O’Sullivan, chief economist at MF Global Ltd., told Bloomberg. “So certainly as the economy recovers you will see the labor force show its usual cyclical bounce back.”
The numbers will result in more Americans back to work and offer better opportunities being offered to the 17.1% of citizens who are underemployed.
Another slight but positive indication of future hiring was an increase in the average workweek in April by 0.1 hour to 34.1 hours, closer to the “healthy” economy workweek of 37 hours.
“Following three quarters of growing production, companies apparently are finding they can’t squeeze out any more output without adding workers,” Bart van Ark, chief economist of business research firm The Conference Board, told CNNMoney.
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