WASHINGTON - U.S. employers added 165,000 jobs in April, and hiring was much stronger in the previous two months than the government first estimated. The job increases helped reduce the unemployment rate from 7.6 percent to a four year low of 7.5 percent.
Coming after a poor jobs report for March,the figures the government issued Friday helped ease fears that U.S. hiring might be slumping this spring for a fourth-straight year. Stock prices soared in response. The Dow Jones industrial average rose 142.38 points to close at 14,973.96, up 1 percent. The broader Standard & Poor’s 500 index surged 16.83 points, or 1 percent, to 1,614.42.
“The U.S. labor market is not looking as bad as was feared,” said Aneta Markowska, chief U.S. economist at financial services company Societe Generale in New York. “Businesses obviously cut very sharply during the recession, and now that revenues are growing, they have to add to head counts. If we do see some improvement in demand in the second half of the year, which I expect to happen, that will lead quickly to additional job creation.”
The Labor Department revised up its estimate of job gains in February and March by a combined 114,000. It now says employers added 332,000 jobs in February and 138,000 in March. The economy has created an average of 208,000 jobs a month from November through April - above the 138,000 added in the previous six months.
“This is a good report,” said John Silvia, chief economist at Wells Fargo. “There’s a lot of strength. … It’s good for the economy. It’s good for people’s income.”
The stronger job growth suggests that the federal budget cutting “does not mean recession,” Silvia said. “It does not mean a dramatic slowdown.”
The unemployment rate has fallen 0.4 percentage point since the start of the year, though it remains high. The Federal Reserve has said it plans to keep short-term interest rates at record lows at least until unemployment falls to 6.5 percent.
The hiring last month was concentrated in services. Construction companies and governments cut jobs. Manufacturing employment was flat.
Some higher-paying sectors added workers. Professional and technical services, which includes accounting, engineering and architecture, added 23,000 jobs. Education and health services added 44,000.
But the biggest job gains were in lower-paying fields, such as hotels and restaurants, which added 45,000 jobs, and retail, which added 29,000. Temporary-help firms gained 31,000 positions.
The job growth is occurring while the U.S. economy is growing modestly but steadily. It expanded at a 2.5 percent annual rate in the January-March quarter, fueled by the strongest consumer spending in two years.
Consumers have been spending more even though their take-home pay dropped this year when a temporary reduction in the Social Security payroll tax ended. On top of that, the economy has been under pressure from across-the-board government spending cuts that began taking effect March 1. And some small and midsize companies are concerned about new requirements under the federal health-care law.
Americans’ steady spending points to a broader recovery in their financial health that’s easing the effect of the restored payroll tax and raising hopes for more sustainable growth.
Households have shed debt. Gasoline has gotten cheaper. Stock market indexes are hitting records.
And home values are up. Prices rose 9.3 percent in February compared with a year ago, the most in nearly seven years, according to the Standard & Poor’s/Case-Shiller 20-city index.
In April, more Americans said they had part-time jobs even though they wanted full time work. That figure rose 278,000 to 7.9 million, reversing a steep drop the previous month.
Some economists worry that restaurants, retail chains and other companies are hiring more part-time workers in preparation for the implementation of the health-care law. Companies with more than 50 full-time employees in 2013 will be required to provide health insurance to their full time staff members next year.
The revisions to the March and February figures were unusually large. Retailers, restaurants and hotels added 48,000 more jobs in February than previously reported. They accounted for three-quarters of that month’s revision.
The government revises each month’s job totals twice in the following two months. The revisions occur because many companies in the survey submit their responses late. Typically, about 75 percent of the 145,000 employers surveyed submit their responses in time for each month’s initial report. The response rate usually rises to about 95 percent for the third and final estimate.
The average workweek for private-sector employees declined 0.2 hour to 34.4 hours, but average hourly earnings rose 4 cents to $23.87. In the past year, wages have risen faster than inflation.
The number of people who have been unemployed for more than six months dropped 258,000 to 4.4 million. Over the past year, the number of long-term unemployed has declined by 687,000.
Economic growth will cool to a 1.5 percent annualized pace in the second quarter after growing at a 2.5 percent pace in the prior three months, according to a Bloomberg survey of economists from April 5-9.
“We don’t expect the summer swoon talk to go away,” Chris Rupkey, chief financial economist at Bank of Tokyo Mitsubishi- UFJ Ltd. in New York, said in an e-mail. “But for today the labor market is holding its own - Washington has not sent the economy off the rails yet.”
Orders to U.S. factories fell 4 percent in March, the largest amount in seven months, but a key category that signals business investment plans increased. The drop reflected a plunge in the volatile category of commercial aircraft, the Commerce Department said Friday. Orders had been up 1.9 percent in February.
Orders in a category considered a proxy for business investment plans rose 0.9 percent, a modest gain but an improvement from a preliminary report last week that had shown a decline.
Service industries in the U.S. expanded in April at the slowest pace in nine months.
The Institute for Supply Management’s nonmanufacturing index declined to 53.1 last month from 54.4 in March, a report from the Tempe, Ariz.-based group showed Friday.
The report, after the group’s factory index that showed less growth among manufacturers, indicates federal budget cuts and the higher payroll tax are filtering through the economy. At the same time, a rebounding housing market remains a source of strength and is helping keep the expansion from faltering.
“We are starting to see some of the drag from fiscal tightening,” Robert Dye, chief economist at Comerica Inc. in Dallas, said before the report. The figure is “consistent with an expanding service sector, but not robustly expanding.” Information for this article was contributed by Christopher S. Rugaber and Martin Crutsinger of The Associated Press and by Alex Kowalski and Michelle Jamrisko of Bloomberg News.
Front Section, Pages 1 on 05/04/2013