Published: Sun, May 06, 2018
Business | By Pearl Harrison

Unemployment Rate Drops to 17-Year Low, Economy Adds 164000 Jobs

Unemployment Rate Drops to 17-Year Low, Economy Adds 164000 Jobs

April's low unemployment rate is getting a great deal of attention in the press since a rate below 4% is a rare phenomenon.

Economists polled by Reuters had forecast payrolls rising by 192,000 jobs in April and the unemployment rate falling to 4 per cent.

The report indicates another month of solid job gains for an economy that has been expanding for nearly nine years.

"We have people that aren't working".

In other words, the natural rate of unemployment must be much, much lower than we thought. With all the good news, confidence is soaring. That's not what's supposed to happen when unemployment gets as low as it can. which tells us that unemployment must not have bottomed out yet.


Also, 33 percent of respondents said they were offering higher compensation to workers, on par with the previous month and the highest reading since 2000, the federation said. The average hourly earnings for private-sector workers rose only 0.1% in April, and yet many companies such as 3M, Whirlpool and Chipotle have started to increase prices in reaction to higher oil prices and trade war fears.

Many economists say the unemployment rate is now so low that wage growth should begin to climb this summer, since employers will face more pressure to boost pay in order to hire workers.

Household disposable income increased at a rate of 3.4 percent in the first quarter, accelerating from the fourth quarter's 1.1 percent pace. Employment gains have averaged 199,750 jobs per month this year. The increase in people earning paychecks has bolstered demand for housing, even though fewer properties are being listed for sale. And more people are shopping, with retail sales having picked up in March after three monthly declines. Restaurants and hotels hired 18,000 new employees.

This compares to the 22,400 jobs the industry added the month prior. April's job growth was below economists' expectations for a gain of 193,000.

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was essentially unchanged at 5.0 million in April. This would seem to be a sign of improving prospects for USA workers-if not for a couple of wrinkles. Claims of unemployment benefits fell to the lowest level since 1969 in the week ending April 21. Once you control for that, wage growth is right about where you would expect it to be. Despite the softer-than-expected wage reading, an unemployment rate drifting further below Federal Reserve officials' estimates of levels sustainable in the long run may in their view add to upward pressure on wages and inflation. That includes almost 800,000 jobs added since the President signed the Tax Cuts and Jobs Act into law.

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