DATA SNAP: Tame Job, Wage Growth Ease Inflation Worries
Last update: 5/4/2007 8:30:00 AM
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Apr Employment Report ! Consensus: !
Apr Mar ! Payrolls: +110K !
Payrolls +88K +177Kr ! !
Unemployment Rate 4.5% 4.4% ! Actual: +88K !
Hourly Earnings $17.25 $17.21r ! !
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By Brian Blackstone
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--U.S. employment grew at its slowest pace in more than two years last month, with those slim gains almost entirely in health care and government, pushing the unemployment rate slightly higher.
The erosion in job conditions also held wage growth in check, suggesting that the economic slowdown that began a year ago is having a damping effect on underlying inflation, which should prove comforting to Federal Reserve officials who are widely expected to hold interest rates steady next week.
Non-farm payrolls increased 88,000 in April, its smallest gain since November 2004, after growing 177,000 in March and 90,000 in February, the Labor Department said Friday. Previous reports showed job growth of 180,000 in March and 113,000 in February.
The unemployment rate rose from 4.4% to 4.5%.
Average hourly earnings increased $0.04, or 0.2%, to $17.25. That was up just 3.7% from a year earlier, suggesting wage inflation is easing.
March's payroll gain was slightly below Wall Street expectations of a 110,000 rise, though an ADP-Macroeconomic Advisers report Wednesday had many economists looking for a lower reading. Economists had expected a 4.5% unemployment rate and 0.3% rise in wages.
The jobs data suggest that some of the economic weakness from the first quarter carried over into the current one, though recent manufacturing and services activity data suggest somewhat stronger momentum.
Still, with the jobless rate near six-year lows, consumers should remain supported in coming months. Consumer spending makes up about two-thirds of GDP, so even modest growth there can offset sizable drags in other sectors, as evidenced by last quarter's gross domestic product report.
The jobs data suggest the Fed will hold interest rates steady at 5.25% for a seventh-straight time when it meets next week. Though the Fed at its March meeting dropped its explicit reference to the possibility of higher rates, officials have since said they still see inflation as the primary policy risk.
High resource utilization, a nod to the still-low jobless rate, has been cited repeatedly by the Fed as an inflation risk. Still, underlying inflation measured by the personal consumption expenditures price index excluding food and energy - the Fed's preferred gauge - is running at only a 2.1% annual rate, which is very close to the Fed's understood 1% to 2% comfort zone.
That suggests that, to the extent that there are price pressures in the economy, they are coming from volatile sectors like food and energy and not the labor market.
The Labor Department said hiring last month in goods producing industries fell by 28,000. Within this group, manufacturing firms cut 19,000 jobs - the 10th-straight decline - while construction firms shed 11,000.
Service-sector employment, meanwhile, increased by 116,000. Retail fell by 26,100. Business and professional services companies' payrolls rose 24,000. Education and health services employment jumped by 53,000. Government added 25,000 jobs.
The average work week was down 0.1 hour at 33.8 hours.
-By Brian Blackstone; Dow Jones Newswires; 202-828-3397; brian.blackstone@dowjones.com
(END) Dow Jones Newswires
May 04, 2007 08:30 ET (12:30 GMT) |
