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Job growth slows in US, unemployment rises

Job growth slows in US, unemployment rises
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First Published: Sat, May 05 2007. 12 37 AM IST
Updated: Sat, May 05 2007. 12 37 AM IST
Job growth in the U.S. fell to its lowest level in more than two years in April as payroll losses spread from struggling homebuilders and factories to retailers.
The 88,000 increase in employment followed a 177,000 gain in March that was smaller than previously estimated, the Labor Department reported on 5 May in Washington. The jobless rate rose to 4.5 percent from 4.4 percent, which matched a five-year low, while wage growth slowed.
The figures signal the economy may be slow to recover after expanding at an annual rate of just 1.3% last quarter. Bonds gained on speculation that the Federal Reserve, which is still forecasting a pickup, will be forced to reduce interest rates later this year.
“Employers are feeling the pinch,” said Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis. “It opens the door a little bit wider for the Fed, if inflation comes down, to start thinking about a rate cut.”
The slow pace of job gains last month reflects firings at retailers as well as construction companies and manufacturers. Retailers cut 26,000 jobs, while builders lost 11,000.
“This isn’t yet a dramatic slowing in the labor market, but the momentum is clearly down,” said James O’Sullivan, senior economist at UBS Securities LLC in Stamford, Connecticut. “With the labor market weakening and gasoline prices up, the outlook for consumer spending the next few months is less positive than it was in the first quarter.”
Revised Lower
Revisions for the previous two months lowered the payroll count by 26,000 jobs compared with the Labor Department’s prior estimates.
Economists projected payrolls would gain by 100,000 after a previously reported 180,000 March increase, according to the median of forecasts in a Bloomberg News survey. They accurately anticipated the rise in the unemployment rate.
Ian McCarthy, chief executive of Atlanta-based builder Beazer Homes USA Inc., said April 26 that the housing market remains “extremely challenging,” and he doesn’t see any signs of recovery.
Workers’ average hourly earnings rose 0.2% after a 0.3% increase the previous month. Economists expected a 0.3 percent increase in hourly wages. Earnings were up 3.7% from a year ago.
Factory Payrolls
Manufacturers’ payrolls shrank by 19,000 last month after declining by 18,000 a month earlier. Economists expected factories to eliminate 14,000 positions. The manufacturing workweek decreased to 41.1 hours and overtime declined to 4.2 hours from 4.3 hours.
Tecumseh Products Co., a maker of compressors and lawn- mower engines, said last week it will cut 310 jobs at seven plants in North America and one in the Czech Republic to try to boost productivity. The Tecumseh, Michigan-based company employed 18,500 people as of Dec. 31.
Service industries, which include banking, insurance, restaurants and retailers, added 116,000 workers last month, the fewest since June 2006, after adding 141,000 in March.
Citigroup Inc., the biggest U.S. bank, said last month it plans to reduce annual spending by $4.6 billion in the next three years and eliminate 17,000 jobs to bring costs down.
Public Hiring
Government agencies added 25,000 jobs last month, or more than a quarter of the total increase. Government payrolls this year have grown by 105,000, accounting for a fifth of all jobs.
Average weekly hours worked by production workers fell to 33.8 from 33.9, matching the forecast in the Bloomberg survey.
Average weekly earnings fell to $583.05 last month from $583.42 in March.
The Fed said last week in its regional economic survey that “most districts reported tight labor market conditions” between late February and mid-April. Wage gains didn’t appear to be filtering through to consumer prices, the report also said.
The central bank on March 21 kept the benchmark overnight lending rate at 5.25 percent. All 69 economists surveyed by Bloomberg News forecast no change in the rate when central bankers meet on May 9.
The job market is cooling as growth slows. The economy expanded at an annual rate of 1.3 % in the first three months of the year, the weakest pace since the first quarter of 2003, the Commerce Department said last week. Consumer spending, which accounts for about 70 percent of the economy, rose at an annual rate of 3.8%.
“The current level of economic activity is consistent with an unemployment rate closer to 5 percent,” Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc., said in a note to clients. “We expect the unemployment rate to begin rising some time soon.”
Consumer Spending
There are also signs consumer spending may cool. A government report this week showed a gain in March personal spending that was less than economists forecast, leaving the consumer with little momentum heading into the second quarter.
Wal-Mart Stores Inc., the world’s largest retailer, is among companies outside of housing and manufacturing that are reducing headcount. Bentonville, Arkansas-based Wal-Mart said last month it will cut 1,200 salaried jobs at its U.S. Sam’s Club stores by giving fewer managers more responsibility.
“The economy has lost a little momentum and growth prospects remain somewhat questionable,” said Ken Goldstein, an economist at the Conference Board, in a statement April 26. “Job growth may be modest this summer.”
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First Published: Sat, May 05 2007. 12 37 AM IST