Job Growth Gathers Strength -- 2nd Update

By Dow Jones Business News, 
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By Josh Mitchell

U.S. employers in April added jobs at one of the fastest paces of the recovery, rekindling hopes for an upturn strong enough to alleviate the economy's longstanding ills.

Nonfarm employment grew by 288,000 in April and the jobless rate sank to 6.3%, the Labor Department said Friday. The new jobs--spread across an array of industries from retail to construction--put total payrolls closer to the all- time peak, reached near the recession's start, after a long and grinding recovery.

The report offered a sense of relief just days after the government said the U.S. economy nearly stalled in the first quarter, expanding at an annual pace of just 0.1%. It also helps put to rest doubts about the durability of the recovery more broadly, coming after harsh winter weather slowed job growth and other economic indicators.

"The economy was frozen at the beginning of the year and it has thawed out," said Stuart Hoffman, chief economist at PNC Financial Services Group. The latest job growth suggests the weak reading of economic output was "a big head fake and the economy has picked up a lot of momentum."

Still, the report included numerous worrisome signs, among them another exodus of workers from the labor force and persistently weak wages.

The burst of job growth is still likely enough to reassure Federal Reserve officials as they gradually withdraw the central bank's support for the economy. Fed policy makers this past week further cut their monthly bond purchases, launched in 2012 to help goose the recovery, by $10 billion to $45 billion based on their assessment the economy is strengthening. But Fed officials remain concerned about the broader slack in the long-struggling labor market, including factors highlighted in Friday's data, that should keep them wary of raising interest rates soon.

Stocks initially rose as much as 61 points after the report was released, but eventually turned lower. The Dow Jones Industrial Average fell 45.98 points, or 0.3%, to 16512.89. The yield on benchmark 10-year Treasurys fell slightly to 2.590%, as prices rose, as investors have adjusted to the Fed's slow-but-steady pullback from easy money.

The job gains, marking the fourth-best month of growth since the recovery began in mid-2009, are likely to raise expectations the economy could return to the robust expansion pace seen last fall.

After revisions to prior estimates, job growth over the past three months has averaged 238,000--far above last year's pace--and other metrics this week showed new momentum in the manufacturing sector and a rebound in consumer spending.

But the economy has seen regular bursts of momentum broken by sudden downswings. Looking beyond the monthly volatility, employment growth has averaged about 197,000 jobs over the last year--roughly in line with the pace of the past few years.

Friday's report also offered several reminders of the barriers to a breakout economic upturn.

The month-over-month plunge in the jobless rate reflected a sharp contraction in the pool of American workers, with far fewer people seeking jobs. That sent the labor-force participation rate back to a three-decade low of 62.8%, puzzling economists and policy makers who have been expecting participation to pick up as jobs increased.

Workers' wages--stagnant for years--budged little last month despite the apparent hiring spree. Wages rose just 1.9% from a year earlier, limiting Americans' ability to significantly raise their living standards.

Laura Roberts, 32 years old, lost her job of six years as a manager at an international nonprofit group in a round of layoffs in February. Ms. Roberts had already spent two years looking for a better-paying job, but she said the competition was intense and she was repeatedly passed over. After being laid off, she said she lowered her expectations. "I think I applied to about 15 jobs," Ms. Roberts said. "I had to change what I was looking for a bit."

After a month of unemployment, she was hired by a national caterers' association in Columbia, Md., at slightly lower pay--in the mid-$60,000s--and with a significantly longer commute from her home in Washington. "I think, honestly, I got lucky," Ms. Roberts said.

Nearly 10 million Americans remained unemployed in April, more than a third of them out of work for at least six months. About 7.5 million Americans were stuck in part-time jobs because they couldn't find full-time work.

A broader measure of unemployment that includes involuntary part-time workers and people too discouraged to search for a job fell to 12.3% last month. But it stood at 8.4% just before the recession started in December 2007.

Kelly Lamoree of King George, Va., was laid off from her customer-service position at a medical-billing firm this winter. It was just the latest in a string of low-paying jobs she's held since losing her call-center job at a major bank in 2011 during a company restructuring.

Ms. Lamoree, 47 years old, says she has applied for roughly 50 jobs but received only a few responses. She recently received an offer to work at a local dog day-care center, making $10 an hour with no benefits. That would be about $3.50 less than she was making before, "and there are no benefits, no health insurance, no paid time off or anything," said Ms. Lamoree, who is receiving unemployment benefits while weighing whether to take the job.

"I got to decide, 'Do I take this or do I wait until something better comes up?'" she said. "It's kind of a devil's bargain."

Meanwhile, a truce in Washington's budget battles earlier this year helped propel confidence about the recovery. Federal spending cuts have eased a bit, buoying contractors and strained local governments. Public-sector employment appears to be stabilizing, with local and state governments adding 15,000 jobs in April to help offset a small decline at the federal level.

The job growth also appears to be driven by a rebound in consumer spending--coming after the winter chilled sales of cars, furniture and other goods. The retail sector grew by 35,000 jobs in April, and employment in food services-- including restaurants and bars--climbed by 33,000.

Private firms also appear to be renewing investment cautiously. That has helped boost the factory sector, which continued to add jobs last month.

Some companies are proceeding with upgrades after years of resisting big-ticket expenses, said Jason Premo, co- owner of ADEX Machining Technologies LLC, a South Carolina-based maker of aircraft parts.

The firm has hired seven people this year, mostly machinist technicians and engineers. The 50-employee company plans to add an additional five to 10 people this year if demand for newer aircraft fleets continues to rise, Mr. Premo said. Businesses have hunkered down for a while, pushing off "capital-equipment-investment upgrades and expansion," he said. "You can only do that for so long."

Write to Josh Mitchell at joshua.mitchell@wsj.com

Corrections & Amplifications

April marked the fourth-best month of job growth since the economy emerged from recession in mid-2009. An earlier version of this article incorrectly said it was the second-best month.

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  05-02-141927ET
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This article appears in: US Markets , Economy

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