Jobs down, but outlook brightens for U.S. economy

Loss of 20,000 jobs in April is the smallest decline this year.

By Mark Trumbull | Staff writer of The Christian Science Monitor

posted May 02, 2008 at 4:00 p.m. EDT

America's labor market continued to weaken in April, but the news came with a silver lining: The economy shed fewer jobs than in other recent months.

The news – better than many forecasters expected but not outright positive – is important because the overall economy depends heavily whether employers are boosting or cutting payrolls. If most people have jobs, they can keep spending, simple as that.

The Labor Department numbers released Friday were mixed, but on balance negative:

•Total US jobs fell by 20,000, as measured by a survey of employers. By comparison, the economy lost about 80,000 jobs in each of the year's first three months, after modest gains throughout last year.

•Unemployment, measured in a separate survey of workers, fell to 5 percent from 5.1 percent in March. In this survey, the number of people employed rose during the month, but so did the number of people who have part-time jobs but want full-time work.

•The hours in a typical work week fell both at factories and in the broader economy.

•Wages for nonsupervisory workers grew, but by just a penny to $17.88 per hour on average. Rising costs for things like gasoline mean that wages have actually been falling, when measured against inflation, in recent months.

"The April employment report was a curious mixture," economist Nigel Gault wrote in a report for Global Insight, a forecasting firm in Lexington, Mass. "The headline jobs decline was less than expected ... but the most cyclically-sensitive indicators in the report showed unrelenting weakness."

Construction jobs posted their biggest decline ever, he said. Manufacturing and retail payrolls also shrank. The positive counterbalance was in the large service sector, where jobs rose in healthcare and professional and technical services.

Although weak, the report seemed in line with recent shifts in financial markets. Many investors now hope that an economic downturn will be relative mild rather than severe, despite the lingering challenges of a deep housing slump and trouble in the banking industry. The Dow Jones Industrial Average had already risen above 13,000 Thursday for the first time since early in the year, and remained near that level Friday as investors digested the job news.

The job report also is reassuring to the Federal Reserve, which cut its short-term interest rate earlier this week while hinting that it may take a break from further interest-rate stimulus for economy.

"The smallest decline in employment so far this year will make the Fed feel more comfortable about the pause in rate cuts that it tentatively signaled this week," Mr. Gault wrote. "But with goods employment still declining sharply, hours worked down, and part-time employment up, this report can't be taken as a signal that the economy is out of the recession woods."