Jobless rate drops below 4%, but questions remain

May 06, 2018, 16:43
Jobless rate drops below 4%, but questions remain

USA job growth increased less than expected in April and the unemployment rate dropped to near a 17-1/2-year low of 3.9 percent as some jobless Americans left the labor force.

Policymakers at the Federal Reserve, America's central bank, watch the employment situation...

Employers added about 164,000 jobs in April, up from last month's revised number of 135,000 jobs.

In a report from CNBC, claims were numbered at 225,000 in the latest week polled, a less-then-expected number from economic analysts from the preceding week. That was the fewest amount of jobs created in six months and followed an outsized gain of 324,000 in February.

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While cold weather in March and April probably held back job growth, hiring is moderating as the labor market hits full employment. At the same time, employers have become less and less likely to shed workers. April's low unemployment rate is getting a great deal of attention in the press since a rate below 4% is a rare phenomenon. And it's just in time for all those college students who are heading home and looking for that summer job. It only counts people as unemployed if they have looked for a job in the four weeks before the survey was conducted, leaving out people who have searched for work less recently or who have left the workforce for other reasons. The unemployment rate for adult women fell to 3.5 percent, its lowest level in more than 17 years.

"The longer the economy burns hot, the more workers are in the driver's seat negotiating with companies", said Andrew Chamberlain, chief economist at Glassdoor, a jobs site.

"I don't think this report changes anything with the Fed", said Harm Bandholz, chief US economist at UniCredit Bank AG.

The home market, a critical component of the USA economy, has been a beneficiary of the steady job growth. Either companies will have to pay workers more - or they'll have to increase investment to boost production. The Employment Cost Index (ECI), widely viewed by policymakers and economists as one of the better measures of labor market slack, increased solidly in the first quarter.

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Inflation has shown signs of accelerating slightly, eroding some of the potential wage growth. "The 0.1% gain on the month, and 2.6% annual pace, were both a tick below the street's forecast and there was a slight downward revision to the prior month as well".

U.S. gross domestic product (GDP) increased at a 2.3-percent annual rate for the first quarter of 2018, beating market consensus of a 2-per cent gain, but lower than the 2.9-percent growth rate in the previous quarter, the Commerce Department said on Friday. "The second straight drop in the labor force participation rate was quite disappointing, as it was driven by a decline in the rate for prime-age workers".

"Wages haven't been able to break out of the 2.5% to 2.8% range", Panday said.

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