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Unemployment Keeps Dropping as Hiring Bounces Back in April

The unemployment rate dropped to just 4.4% – the lowest in a decade – as U.S. employers added 211,000 new employees to their payrolls in April, according to the U.S. Department of Labor, Bureau of Labor Statistics Employment Situation report issued May 5 (Exhibit 1).

contruction workerThe 211,000 new jobs figure marks a strong rebound from just 79,000 new jobs in March (revised down from 98,000 in the original report). This was the 79th consecutive month of job gains.

The 4.4% unemployment rate, down slightly from 4.5% the previous month, is the lowest in a decade (since 2007) (Exhibit 2). The unemployment rate has dropped 0.4% since January and 0.6% year-over-year.

exhibit
      1The robust job market report is heartening news for the economy and gross domestic product (GDP) growth, which sank to a disappointing 0.7% annualized rate in the first quarter of 2017, according to the U.S. Department of Commerce. We expect GDP growth to exceed 2.0% in 2017.

Weekly jobless claims dropped by 19,000 to 238,000 in the final week of April, marking 113 consecutive weeks of claims under 300,000 – the longest stretch since 1970 (Exhibit 3). A total of 1.96 million Americans are collecting unemployment benefits, down 8.1% from a year ago.

Here are some of the other key trends highlighted in the report:

  • exhibit
      2The number of unemployed persons looking for jobs continued to edge down from 7.2 million to 7.1 million for the month.
  • The number of long-term unemployed (those jobless for 27 weeks or more) continues to tick down, dropping to 1.6 million in April, and accounted for 22.6% of the unemployed (Exhibit 4). Year-over-year, the number of long-term unemployed was down by 433,000, but still remains at an elevated level.
  • The labor force participation rate was 62.9% in April, which is little changed this year. The employment-population ratio, at 60.2%, was also little changed from last month, but was up by 0.5% since December.exhibt 3
  • The labor force participation rate for those in their prime working years (age 25 to 54) remained unchanged at 81.7% in April (Exhibit 5). That is about 1.3% below the prerecession level, and continues to be a concern.
  • The number of persons employed part time for economic reasons declined by 281,000 to 5.3 million in April (Exhibit 6). Over the past 12 months, the number of persons employed part time for economic reasons has decreased by 698,000.
  • exhibit
      4Average hourly earnings for all employees on private nonfarm payrolls rose by $0.07 to $26.19 (Exhibit 7). Year-over-year, average hourly wages have risen by $0.65, or 2.5%.

The strengthening job market has been one of the key drivers of economic growth the past few years, and will be a factor in the Federal Reserve Board's consideration for approving additional interest rate hikes this year beyond its 0.25% hike on March 15.

We believe that if employment growth continues and other economic indicators remain solid, the Fed will make further rate hikes throughout 2017.exhibits 5, 6, and 7

We believe that a series of small rate hikes during the year would be beneficial to net savers without materially affecting the economy or consumer spending.

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