The U.S. economy accelerated its rebound from a recent soft patch as unemployment unexpectedly fell to a fresh 49-year low amid surprisingly strong hiring and cooler-than-projected wage gains, suggesting the hot labor market can extend its run.
Payrolls climbed by 263,000 in April after a downwardly revised 189,000 advance the prior month, according to a Labor Department report Friday that exceeded all estimates in a Bloomberg survey. The jobless rate unexpectedly fell to 3.6% while average hourly earnings growth was unchanged at 3.2%, below projections.
U.S. stocks rose after the report, while the dollar and Treasury yields were lower. The fed funds futures market briefly showed a slight reduction in odds for a Federal Reserve rate cut this year, but subsequently shifted to show a slightly lower end-of-year rate for the Fed’s benchmark.
President Donald Trump tweeted “JOBS, JOBS, JOBS!” after the report and will likely seize upon the data as validation of his tax-cutting policies. At the same time, the strength endorses Fed Chairman Jerome Powell’s resistance to White House and Wall Street calls for interest-rate reductions.
“It’s clearly telling you this economy is still chugging along very nicely,” Torsten Slok, chief economist at Deutsche Bank Securities, said on Bloomberg Television. “It is inflationary in the sense that wages did go up but they didn’t go up as much as we had expected.”
The surprising overall robustness -- which didn’t reflect any surge in temporary hires for the 2020 Census, as some analysts had flagged -- follows months of broad labor market strength. While the expansion is poised to become the nation’s longest on record at midyear, economists expect a deceleration this year even after a strong first quarter.
However, the lower unemployment reading was due in part to a factor economists don’t always see as a healthy sign: The participation rate, or share of working-age people in the labor force, decreased to 62.8% from 63%.
