U.S. nonfarm payrolls increased 223K, jobless growth down to 5.4%
U.S. job growth rebounded last month and the unemployment rate dropped to a near seven-year low of 5.4 percent, signs of a pick-up in economic momentum that could keep the Federal Reserve on track to hike interest rates this year.
Nonfarm payrolls increased 223,000 as gains in services sector and construction jobs offset weakness in mining, the Labor Department said on Friday. The one-tenth of a percentage point decline in the unemployment rate to its lowest level since May 2008 came even as more people piled into the labor market.
While the report suggested underlying strength in the economy at the start of the second quarter after a bad stumble, wage growth was tepid and March payrolls were revised downward, leading financial markets to push back rate hike bets.
“We see this report as reducing concerns that weak first-quarter growth represents a loss of economic momentum,” said Michael Gapen, chief U.S. economist at Barclays in New York.
Nevertheless, he said the bounce back was not strong enough to think the Fed could bump rates higher before September.
March payrolls were revised to show only 85,000 jobs created, the fewest since June 2012. That resulted in 39,000 fewer jobs added in February and March than previously reported, underscoring the weakness in activity at the start of the year.
Investors on Wall Street cheered the report, with major stock indexes rising more than 1 percent.
Yields on U.S. Treasury debt slipped and futures contracts showed traders clinging to bets the U.S. central bank would raise rates from near zero this year. The dollar was little changed against a basket of currencies.
LABOR MARKET TIGHTENING
The drop in the unemployment rate pushed it within a whisker or two of the 5.0 percent to 5.2 percent range that most Fed officials consider consistent with full employment.
Some economists said the tightening labor market could push Fed officials to tighten monetary policy despite anemic wage growth.
