Friday, May 06, 2005

Employers Hire More, Jobless Rate Steady

Yahoo! News
Employers Hire More, Jobless Rate Steady

By JEANNINE AVERSA, AP Economics Writer

Employers ramped up hiring in April, adding 274,000 jobs, enough to hold the nation's jobless rate steady at 5.2 percent. The latest figures offered a hopeful sign that the labor market is gaining traction and that any economic rough patch will be temporary.

The Labor Department report, released Friday, also showed that job gains for both February and March turned out to be bigger than previously estimated. That also suggested that the overall health of the job market is improving.

"The economy is back on track," declared Bill Cheney, chief economist at John Hancock Financial Services.

The 274,000 net number of jobs added in April was the most since February and exceeded economists' forecasts. Before the report was released analysts were calling for a gain of around 175,000. They were also predicting the unemployment rate would be unchanged from March's reading of 5.2 percent.

Payroll gains were widespread, with retailers, health care providers, construction companies and financial services all showing employment rising. Manufacturing, however, lost jobs for the second straight month.

Job gains for March were revised to 146,000 from an initial estimate of just 110,000. And, payrolls for February were moved up to show an increase of 300,000, better than the 243,000 previously reported.

In another development, consumer confidence sank over the past month as surging energy bills and higher borrowing costs led people to worry about inflation and the condition of the economy generally.

The AP-Ipsos consumer confidence index came in at 78.2 in May, according to figures released Friday. That was down sharply from the showing of 84.5 registered in April and represented the lowest reading since October 2003.

May's showing suggests that consumers aren't feeling as good about the economy's prospects as they did a year ago, when the index clocked in at 87.4.

On Wall Street, investors were cheered by the employment report. The Dow Jones industrials were up 46 points and the Nasdaq gained 8 points in morning trading.

The Federal Reserve, worried more about inflation than economic growth, boosted short-term interest rates on Tuesday by one-quarter percentage point to 3 percent. It was the eighth increase of that size since the Fed began to tighten credit last June.

Economists said Friday's report would keep the Fed on a course of pushing rates higher through much of this year.

Workers' average hourly earnings rose in April to $16, up 0.3 percent from March's $15.95. That was slightly higher than the 0.2 percent increase that analysts were forecasting. That pickup might make the Fed a little bit more nervous about inflation but likely won't make the board more aggressive in tightening credit, said Anthony Chan, senior economist at JP Morgan Asset Management.

Economists, meanwhile, were especially encouraged to see that the work week increased to 33.9 hours in April, after five straight months of being flat. They thought that boded well for better hiring in the future.

Addressing the labor market, Fed policy-makers said Tuesday that conditions "apparently continue to improve gradually."

The positive news on jobs comes after some earlier reports suggested the economy hit a soft patch.

The government reported last week that the economy in the first quarter of 2005 grew at a 3.1 percent annual rate, its slowest pace in two years as high energy prices crimped consumer and business spending.

Oil prices, which had climbed into record-high territory on March 18 at $56.72 a barrel, set a new all-time high of $57.27 a barrel at the beginning of April. Prices have retreated somewhat since then.

Analysts believe that the rough patch the economy encountered as the first quarter drew to a close was temporary and not a sign of a slide toward recession. Friday's jobs report is now raising hopes that economic growth in the current April-to-June quarter may turn out to be better — as opposed to worse — than the first quarter's showing.

President Bush wants to see the economy and the labor market on firm footing especially as he tries to sell the public and politicians a centerpiece of his second-term economic agenda: a revamp of the Social Security retirement program.

There were 7.7 million people unemployed in April, with the average duration of 19.6 weeks without work.

However, the share of the working-age population working or actively seeking a job rose in April to 66 percent. That was up from 65.8 percent in March, which was a nearly 17 year low first reached in January.