U.S. Payrolls Rose 88,000 in April; Unemployment Rate at 4.5%
By Joe Richter
May 4 (Bloomberg) -- Employers in the U.S. last month added the fewest jobs in more than two years as payroll losses spread beyond homebuilders and manufacturers. The unemployment rate rose.
The 88,000 increase in employment followed a 177,000 gain in March that was smaller than previously estimated, the Labor Department reported today in Washington. The jobless rate rose to 4.5 percent from 4.4 percent, which matched a five-year low.
Fewer jobs may herald slower wage growth for Americans already struggling with higher gasoline costs, diminishing prospects for faster economic growth in coming months. The report may revive speculation that the Federal Reserve, which is expected to leave interest rates unchanged next week, will need to cut in coming months to boost growth.
``The consumer is going to feel some pressure heading into the second half,'' Jeffrey Roach, chief economist at Horizon Investments in Charlotte, North Carolina, said before the report. ``I expect to see communication from the Fed about the risks to growth, and we should see a rate cut by year-end.''
Economists projected payrolls would rise by 100,000 following a previously reported 180,000 March increase, according to the median of 85 forecasts in a Bloomberg News survey. They also anticipated an increase in the unemployment rate to 4.5 percent from 4.4 percent.
The April increase in payrolls was the lowest since November 2004.
Revisions
Revisions for the previous two months decreased the payroll count by 26,000 jobs compared with the Labor Department's previous estimates.
Workers' average hourly earnings rose 4 cents, or 0.2 percent, after a 0.3 percent increase the previous month. Economists expected a 0.3 percent increase in hourly wages. Earnings were up 3.7 percent from April of last year.
The slow pace of job gains last month reflects firings at retailers, construction companies and manufacturers. Retailers cut 26,000 jobs, while builders shed 11,000.
Ian McCarthy, chief executive of Atlanta-based builder Beazer Homes USA Inc., said April 26 that the housing market remains ``extremely challenging,'' and he doesn't see any signs of recovery.
Factory Payrolls
Manufacturers' payrolls shrank by 19,000 last month after declining by 18,000 a month earlier. Economists expected factories to eliminate 14,000 positions. The manufacturing workweek decreased to 41.1 hours and overtime declined to 4.2 hours from 4.3 hours.
Tecumseh Products Co., a maker of compressors and lawn-mower engines, said last week it will cut 310 jobs at seven plants in North America and one in the Czech Republic to try to boost productivity. The Tecumseh, Michigan-based company employed 18,500 people as of Dec. 31.
Service industries, which include banking, insurance, restaurants and retailers, added 116,000 workers last month, the fewest since June 2006, after adding 141,000 in March, the report showed.
Citigroup Inc., the biggest U.S. bank, said last month it plans to reduce annual spending by $4.6 billion in the next three years and eliminate 17,000 jobs to bring costs down.
Hours Worked
Average weekly hours worked by production workers fell to 33.8 from 33.9. Economists in the Bloomberg survey had forecast hours would fall to 33.8 from 33.9.
Average weekly earnings fell to $583.05 last month from $583.42 in March.
The Fed said last week in its regional economic survey that ``most districts reported tight labor market conditions'' between late February and mid-April. Wage gains didn't appear to be filtering through to consumer prices, the report also said.
The central bank on March 21 kept the benchmark overnight lending rate at 5.25 percent. All 69 economists surveyed by Bloomberg News forecast no change in the rate when central bankers meet on May 9.
The job market is cooling as growth slows. The economy expanded at an annual rate of 1.3 percent in the first three months of the year, the weakest pace since the first quarter of 2003, the Commerce Department said last week. Consumer spending, which accounts for about 70 percent of the economy, rose at an annual rate of 3.8 percent.
``The current level of economic activity is consistent with an unemployment rate closer to 5 percent,'' Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc., said in a note to clients. ``We expect the unemployment rate to begin rising some time soon.''
Consumer Spending
There are also signs consumer spending may cool. A government report this week showed a gain in March personal spending that was less than economists forecast, leaving the consumer with little momentum heading into the second quarter.
Wal-Mart Stores Inc., the world's largest retailer, is among companies outside of housing and manufacturing that are reducing headcount. Bentonville, Arkansas-based Wal-Mart said last month it will cut 1,200 salaried jobs at its U.S. Sam's Club stores by giving fewer managers more responsibility.
``The economy has lost a little momentum and growth prospects remain somewhat questionable,'' said Ken Goldstein, an economist at the Conference Board, in a statement April 26. ``Job growth may be modest this summer.''