WASHINGTON • The US economy added the fewest number of jobs in seven months in April, and Americans dropped out of the labour force in droves, signs of weakness that cast doubts on whether the Federal Reserve will raise interest rates before the end of the year.
Non-farm payrolls increased by 160,000 jobs last month as construction employment barely rose and the retail sector shed jobs, the Labour Department said yesterday.
That was the smallest gain since September and below the first-quarter average job growth of 200,000.
While the jobless rate held at 5 per cent that was because people dropped out of the labour force.
The stepdown in job growth could raise concerns that the weakness in overall economic activity was spilling over to the labour market. Economic growth slowed sharply in the first quarter this year.
"The labour market is still reasonably healthy," Mr Joshua Shapiro, chief US economist at Maria Fiorini Ramirez, said before the report. But he added: "We expect the payrolls gains to fade as we get to the end of this year and into next year."
The bright spot in the report was in workers' wages. Average hourly earnings climbed 0.3 per cent last month. That took the year-on-year increase to 2.5 per cent from 2.3 per cent in March, still below the 3 per cent advance that economists say is needed for inflation to rise to the Fed's 2 per cent target.
The US central bank last month offered a fairly upbeat assessment of the labour market, saying that conditions had "improved further".
The Fed raised its benchmark overnight interest rate last December for the first time in nearly a decade. Fed officials have forecast two more rate hikes for this year.
Market-based measures of Fed policy expectations have virtually priced out an interest rate increase at the Fed's June 14-15 meeting, said CME Group's FedWatch. It sees a less than 50 per cent probability of rate hikes in September and November, with a 59 per cent chance at the December meeting.
The labour force shrank by 362,000 as people dropped out in April, while the vast private services sector dominated employment gains, Manufacturing added 4,000 jobs, while mining payrolls fell 8,000. Gains in construction employment slowed sharply, with the sector adding 1,000 jobs, after home building showed some signs of fatigue last month.
Retail payrolls fell 3,100 after hefty gains in the first quarter, despite sluggish sales.
The labour force participation rate, or the share of working-age Americans who are employed or at least looking for a job, fell 0.2 percentage point to 62.8 per cent. It had increased 0.6 percentage point since dipping to 62.4 per cent in September.