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article imageUS unemployment falls to 10-year low in April

By Douglas Gillison (AFP)     May 5, 2017 in World

Unemployment in the world's largest economy fell to the lowest rate in 10 years due to a strong rebound in job creation in April, bringing relief to Donald Trump after disappointing economic data early in his presidency.

After a slow March, when hiring likely was held down by a winter storm, the US economic engine added an estimated 211,000 net new positions while the jobless rate fell a tenth to 4.4 percent, the lowest since May 2007, the Labor Department reported Friday.

The result handily surpassed an analyst consensus, which had predicted 180,000 new jobs for the month, and rebound in the unemployment rate to 4.6 percent.

The news will be welcome at the White House after a first quarter when economic data appeared to have softened. Trump has vowed to add 25 million new jobs over a decade but economists say this may be unrealistic.

The figures supported the view of a healthy US economy but with an increasingly tight labor market, which could begin to fuel inflation worries, especially as wages continued to climb in April.

Average hourly earnings rose nearly 0.3 percent for the month to $26.19. But measured over 12 months, the gains appeared softer. April wages were 2.5 percent higher than the same month last year, down from the 2.6 percent gain recorded in March.

The unemployment rate has now fallen 0.6 percentage points since the start of the year, with 854,000 fewer unemployed people, while average monthly job creation of 185,000 so far in 2017 is in line with last year's trend.

Former Federal Reserve vice chair Alan Blinder called the lack of stronger wage growth a "surprising soft spot" in the latest jobs numbers.

- Inflation worries -

"I think if you asked any economist a year and a half ago what wages would be doing if the unemployment rate was around four and a half percent for some months, we would have said more acceleration than we're actually seeing," he told CNBC.

"And we're not getting it."

US unemployment in April
US unemployment in April
AFP, Jonathan JACOBSEN, AFP

But most economists think the report will strengthen the case for the Federal Reserve to stick to a planned course of two more interest rate hikes in 2017, and may even begin to worry the inflation hawks among the central bankers.

The Fed on Wednesday downplayed the softer economic data in the first quarter of the year as "transitory."

Mickey Levey of Berenberg Capital Markets said "The Fed is a lock to raise rates at its June meeting,"

"The Fed is firmly on a policy normalization track and wants to get rates up to more normal levels, especially given prospects for fiscal reform and its potential to boost the economy," he said in a note to clients, adding that an acceleration in wages "could be close."

Ian Shepherdson of Pantheon Macroeconomics said "falling unemployment will scare Fed hawks."

Those central bankers most worried about inflation pressures, the so-called hawks, "will now be even keener to see rates rise further, despite the levelling-off in hourly wage growth in recent months," he said.

However, Elise Gould of the Economic Policy Institute said a healthy economy should produce 12-month wage growth of between 3.5 and four percent, meaning the Fed should hold off on future rate hikes.

"For the benefits of a growing economy to reach every community, the labor market has to be allowed to tighten up further so that employers are competing for workers and not the other way around," she said in a research note.

- Positive signs -

While the share of long-term unemployed, or those without work for more than 26 weeks, was little changed at 1.6 million, other categories saw distinctly positive signs.

The number of those working part-time but who want full-time work fell by 281,000 to 5.3 million, down nearly 700,000 over the past 12 months.

So-called discouraged workers, or those who have stopped looking for work because they believe none is available, declined by 113,000 from a year earlier to 455,000.

The jobless rate for adult men fell three tenths to four percent but rose a tenth for women to 4.1 percent.

April saw job gains in leisure and hospitality and health care, which added a collective 92,000 net new positions. Bars and restaurants also continued to hire, adding 26,000 jobs last month, bringing the 12-month total for the industry to 260,000.

Insurance carriers hired 14,000 new workers. The mining sector gained 9,000 new jobs, having added 44,000 since October.

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