April jobs report, at 165,000 new jobs, exceeds expectations; Dow surges

The economy turned out more jobs than expected in April and the unemployment rate fell to 7.5 percent, the lowest rate since December of 2008. Since January, the unemployment rate is down 0.4 of a percentage point.

Behind the net gain of 165,000 jobs last month was an improved housing industry, a decline in the price of gasoline that has helped consumers, and a resurgent stock market that may have made some people feel richer.    

“The jobs numbers certainly suggest that things are not falling off the cliff,” says Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Fla. “It looks like the spring slump was less severe than prior years.”

Not only was April report better than expected, but the US Bureau of Labor Statistics also revised upward February's and March's numbers by a total of 114,000 jobs. The upward revisions meant that in March employment grew by 138,000 instead of the first-reported 88,000, and in February jobs increased to 332,000 from 268,000.

The stock market seemed to be encouraged by the jobs numbers, perhaps because they seem to indicate that the Federal Reserve is not likely to make any policy changes in the months ahead. As of noon, the Dow Jones Industrial Average is up 156 points to 14987, after briefly going over 15000 for the first time ever.  

However, economists caution that the jobs numbers do not signify a vibrant economy. The data also showed a drop in the average number of hours people worked per week – perhaps indicating that orders are slowing, causing businesses to cut back on overtime and add more part-time workers. In addition, economists anticipate that the effect of recent federal budget cuts will increase as summer approaches.

“In terms of the general economy, the growth of jobs is just OK,” says Dan Meckstroth, chief economist at the Manufacturers Alliance for Productivity and Innovation in Arlington, Va. “It is just above the 120,000 new jobs needed each month to absorb the new entrants into the economy.”

As economists parsed the April data, some were particularly troubled by a fall in the work week by 0.2 hours. In an analysis sent to clients, Marc Chandler, global head of currency strategy at Brown Brothers Harriman, estimates that this reduced the average work week by 12 minutes for the 135 million labor force.

Mr. Chandler says the reduction in the average work week appears to be a function of an increase in the number of part-time jobs. “The number of people ‘involuntarily’ taking part-time work rose 278,000 to 7.64 million,” he wrote.

However, at the same time, the BLS reported the number of people taking “temp” jobs rose by 31,000 last month. According to temp-service executives, a rise in temp jobs may presage a later rise in full-time jobs, as employers become more confident about adding workers.

The BLS also reported an increase in other white-collar jobs in April, notably a gain of 73,000 jobs in professional and business services. Since the beginning of the year, this category has added 587,000 jobs.

Other service-sector jobs also appeared to be growing. The BLS reported a gain of 38,000 jobs in leisure and hospitality. Over the prior 12 months, this category has added an average of 25,000 new jobs per month.

Manufacturing jobs, however, were flat in April, according to the BLS. Mr. Meckstroth says business is not being helped by a weakening economy in Europe and slower growth in Asia.

However, the improvement in new home construction has continued to add jobs. Over the past six months, construction has averaged 27,000 new jobs per month, says the BLS.

“There are still shortages in skilled workers, machinists, welders, the skilled occupations,” says Meckstroth. “Unfortunately, labor force skills don’t match up with demand.”

The demand for skilled workers is likely to continue for some time.

There is a significant pent-up demand for new automobiles, for example. This week, Ford Motor Co. said it would hire 2,000 workers at its Claycomo, Mo., plant, which makes F-150 pickup trucks. Of the new hires, 900 will work on a third shift.

Demand also is growing for people who can help build new homes.

Meckstroth estimates that new housing starts will jump 24 percent this year and 34 percent next year. Although they are rising from very low levels, he notes that it is having a spill-over effect on demand for wood products, appliances, structural metals, gypsum, and heating and air-conditioning systems.

“It is feeding through all the other materials that go into making a house,” he says. "Unfortunately, it’s not enough to offset weaknesses in other areas.”

Government jobs continued to shrink last month with a loss of 11,000 workers. Of these, 3,500 were part of the shrinking US Postal Service. Loss of jobs at the postal service over the past year has helped to bring total federal government employment down to its lowest level since December 2008.