Unemployment Rate Falls to 3.9% Even as Non-Farm Job Creation Falters

The Fed said that the U.S. labor market continues to strengthen, and today’s jobs report is more evidence of that. The US unemployment rate fell to 3.9% in April, the strongest level since the turn of the century, despite the fact that fewer nonfarm payrolls were added to the economy than had been anticipated. The US economy added 164,000 nonfarm jobs last month, which was lower than expectations of approximately 195,000. Meanwhile, March’s results were revised upward, from 103,000 to 135,000.

An unemployment rate below the 4% level is a rare feat and is one-tenth of a percent stronger than economists had estimated. It shatters the 4.1% threshold that has persisted since October.

Investors breathed a sigh of relief, as while the headline number was better than expected, results overall were more of a mixed bag, which suggests the Federal Reserve may not rush to raise interest rates after all.

Wage growth advanced by a modest 0.15%, or $0.04, in April compared with March. Wells Fargo predicted a 0.2% increase in April’s wages, which would keep the annual rate at about 2.7%. Despite 3.9% unemployment, weak wage growth suggests that inflation may not be rearing its head in the US economy.

Ahead of the report, stocks were meandering between slightly positive and negative territory in anticipation of strong data but the major indices were mostly in the red. Once the data was released, the US index futures turned mixed.

The Fed and Interest Rates

Fed officials are closely monitoring the results to gauge the health of the U.S. economy and determine whether an interest rate hike is imminent. Earlier this week, the Fed opted not to lift rates, saying that inflation is close to the target and suggesting that there wasn’t a need to interrupt their slow-but-steady approach.

There had been a perfect storm of economic indicators building, as evidenced by the tight labor market, corporate America reporting solid earnings growth in the first quarter and more robust hiring in Q1 0218 versus Q1 2017, at 202,000 vs. 182,000, respectively. Meanwhile, on Thursday, weekly jobless claims data revealed that unemployment aid for Americans was at its lowest levels in more than four decades.

Fed economists have been calling for the unemployment rate to fall to 3.8% by the end of 2018, and at this rate they could be proven right. But they were also factoring in robust hiring and a narrowing of the talent pool, according to the Wall Street Journal.

Source: The Wall Street Journal


Workforce Participation Nears 1970’s Levels

Fewer Americans participated in the workforce last month, with the labor-force participating rate falling to 62.8%. This represents the second consecutive monthly decline as rates near levels not seen since the women’s movement.

Some 236,000 US workers left the workforce in April, which the Wall Street Journal suggests is the catalyst for the low unemployment headline number.

Featured image courtesy of Shutterstock. 

Gerelyn has been covering ICOs and the cryptocurrency market since mid-2017. She's also reported on fintech more broadly in addition to asset management, having previously specialized in institutional investing. She owns some BTC and ETH.