US jobless rate at lowest since December 2000

A "help wanted" sign hangs on a window of a restaurant in Lower Manhattan, New York City, on May 4, 2018.
A "help wanted" sign hangs on a window of a restaurant in Lower Manhattan, New York City, on May 4, 2018.PHOTO: AFP

With higher April payrolls and smaller wage gains, labour market unlikely to spur inflation

WASHINGTON • US hiring rebounded last month and the unemployment rate dropped below 4 per cent for the first time since 2000, while wage gains cooled by more than forecast, a sign that the labour market still isn't tight enough to spur inflation.

Payrolls rose 164,000 after an upwardly revised 135,000 advance, Labour Department figures showed yesterday.

Average hourly earnings rose 0.1 per cent from March and 2.6 per cent from a year earlier, both less than projected. The jobless rate, derived from a separate survey of households, fell to 3.9 per cent, the lowest since December 2000, after six months at 4.1 per cent.

Treasury yields dipped and the US dollar fluctuated following the report.

Despite the softer-than-expected wage reading, an unemployment rate drifting further below Federal Reserve officials' estimates of levels sustainable in the long run may in their view add to upward pressure on wages and inflation. That would keep the central bank on track to raise interest rates next month for the second time this year and once or twice more after that.

The results may also reinforce forecasts for a rebound in economic growth this quarter after a slowdown in the first three months of the year, with the labour market supporting gains in consumer spending that may be further fuelled by tax cuts. Companies in industries from services to manufacturing are hungry for workers, indicating hiring is likely to stay solid.

"Overall, it's a good report," said Mr Michael Feroli, chief US economist at JPMorgan Chase.

"Slack is getting absorbed" but "the process of that translating into faster wages has been slow. Wages are clearly the one disappointing part of the report".

For the Fed, though, "this is probably a wash", he said.

April's payroll gain reflected a 168,000 increase in private employment, compared with the median estimate for 190,000. Goods-producing jobs picked up to a 49,000 increase, with construction rebounding to a 17,000 gain after a decline that may have been impacted by weather in March. Manufacturing added 24,000, the seventh straight month at 20,000 or more.

Hiring at service providers was little changed at 119,000, with the biggest gains in professional and business services at 54,000, and education and health services at 31,000.

The decline in the jobless rate resulted from a drop in the number of unemployed people, while the number of employed Americans was little changed. That pushed down the participation rate, or share of working-age people, to 62.8 per cent from 62.9 per cent in the prior month. The employment-population ratio, another broad measure of labour-market health, fell to 60.3 per cent from 60.4 per cent.

The wage figures showed pay gains are having a tough time breaking out of their recent pace of modest increases. The monthly gain in average hourly earnings followed a downwardly revised 0.2 per cent increase in March, and March's annual increase was also revised lower to 2.6 per cent.

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A version of this article appeared in the print edition of The Straits Times on May 05, 2018, with the headline 'US jobless rate at lowest since Dec 2000'. Print Edition | Subscribe