The U.S. labor market held up better than expected in April despite fears of an economic slump, with 20,000 jobs cut in the month, the Labor Department reported Friday, May 2. The unemployment rate, based on a separate survey, rate fell a tenth of a percentage point to 5.0%.
Despite the negative figure on nonfarm payrolls, the report was better than expected by private economists, who on average had forecast a loss of 75,000 jobs and a jobless rate of 5.2%.
"Job losses are way below the recession norm for this point of business cycle, if this is recession," says Robert Brusca at FAO Economics. "Many things do not really add up for the recession forecasters." The agency made small revisions to prior data to show a drop of 81,000 jobs in March from 80,000 and a decline of 83,000 in February, some 7,000 more than in the earlier estimate.
The report, seen as one of the best indicators of economic momentum, comes amid fears that the world's largest economy may be headed for recession after being battered by a horrific decline in housing and a related credit squeeze. Yet the first-quarter report on U.S. gross domestic product showed a small increase of 0.6%.
Avery Shenfeld at CIBC World Markets says the report still points to economic turmoil, with job declines in key areas such as manufacturing, construction and retailing. "The report was milder than we thought but some of the details were not quite as encouraging," he says. "If you isolate the cyclical industries, employment is dropping quite quickly. It's still not a sign the labor market is healthy."
The employment report showsthe economy still hurting from the housing crisis. Construction shed 61,000 jobs and manufacturing lost 46,000. hat was offset in part by a gain of 37,000 in health care, and 27,000 in professional and technical services. The retail sector,however, lost 27,000 jobs.
Shenfeld says that although overall income for the economy may be steady, the sector details show problems. "When you are trying to take the temperature of the economy and where it stands in the business cycle, you look at the cyclical industries like manufacturing, construction and retail," he says.
Stephen Gallagher, economist at Societe Generale in New York, argues that the report suggests a decline for the overall economy but not a calamity. "Overall, the modest pullback supports a mild recession or downturn for the U.S. economy," he says. "That is not good news, but the evidence lessens the fears of a deep or prolonged downturn."
Average hourly earnings, a key sign of wage-driven inflation, rose a modest 0.1% compared with analyst expectations of a 0.3% gain. Over the past year, wages are up 3.4% compared with a 3.7% gain based on last month's reading.
Copyright Agence France-Presse, 2008
