Unemployment Rate Rises Despite Increase in Jobs

Friday, 06 May 2011 08:39 AM

 

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U.S. private employers shrugged off high energy prices to add jobs at the fastest pace in five years in April, pointing to underlying strength in the economy, even as the jobless rate rose to 9.0 percent.

Private sector hiring, including a big jump in the retail sector, boosted overall nonfarm payrolls by 244,000, the largest increase in 11 months, the Labor Department said, beating economists' expectations for a 186,000 gain.

The private sector job gains of 268,000 were the biggest since February 2006 and accounted for all the jobs created last month. The data was supportive of views the economic recovery would regain speed this quarter after stumbling in the first three months of the year on high food and energy prices.

The data also contrasted with signs of slowing in the labor market.

"We're getting close to the point where we are seeing sustainable job growth. That creates income that generates spending and, hopefully, more jobs," said Gary Thayer, chief macro strategist at Wells Fargo Advisors in St. Louis, Missouri.

"We still have a lot of people unemployed. That holds things back," he said.

SEVEN STRAIGHT MONTHS OF JOB GAINS

The U.S. economy has now created jobs for seven straight months, but gains have been too meager to make much of dent on the pool of 13.7 million Americans out of work.

Figures for the previous two months were revised to show 46,000 more jobs added.

The unemployment rate backed away from a two-year low of 8.8 percent. It is derived from a separate survey of households, which showed a decline in employment and a modest rise in the size of the labor force.

U.S. stock index futures extended gains, while U.S. bond prices extended losses. The dollar rose further against the euro and yen.

The unemployment rate has dropped a full percentage point since November and the latest rise will strengthen the Federal Reserve's resolve to stick to its ultra-easy monetary policy stance.

The Fed last month signaled it was in no hurry to start withdrawing its massive stimulus for the economy, even as other major central banks around the world have begun to raise interest rates.

"To us it looks like a good recovery taking place in payrolls. We think employment is recovering strongly and will continue to do so throughout 2011," said Michael Shaoul, chairman of Marketfield Asset Management in New York.

High gasoline and food prices clipped U.S. economic growth in first quarter. The economy grew at a 1.8 percent annual rate after expanding at a 3.1 percent clip in the final three months of last year.

The economy has recovered only a fraction of the more than 8 million jobs lost in the 2007-2009 recession. Job growth of between 250,000 and 300,000 a month is needed to make significant strides in reducing unemployment.

Details of the April employment report were generally upbeat with the exception of government employment, which contracted for a sixth straight month in April, shedding 24,000.

The bulk of gains in payrolls last month were in the private services sector, which added 224,000 after 194,000 jobs March. Within that segment, retail saw a surge of 57,100 jobs and leisure and hospitality added 46,000 positions.

Employment in the goods-producing industries increased 44,000, with construction payrolls climbing by 5,000 and manufacturing hiring gaining 29,000, adding to the 22,000 jobs created in March.

The employment report also showed the average workweek unchanged at 34.3 hours for a third straight month and no sign of wage inflation, with average hourly earnings rising a mere 3 cents.

© 2014 Thomson/Reuters. All rights reserved.

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