The latest jobs figures from the Department of Labor paint a brighter picture of the overall economy than other recent data, which had been weaker and prompted economists to warn of a spring swoon for the third year in row. Those worries had been heightened after the March jobs report, which initially showed the economy to have added just 88,000 jobs, much fewer than had been expected.
On Friday, however, the government sharply revised upward its estimates for job creation in February and March, concluding that the economy actually generated 332,000 jobs in February and 138,000 in March. The unemployment rate, which is based on a separate survey, fell by 0.1 percentage point to 7.5 percent, from 7.6 percent in March.
“It’s back to normal for this cycle,” said Steve Blitz, chief economist at ITG. “This number is back to the mainstream of what we’ve seen in this recovery.”
Still, Mr. Blitz noted, many of the new jobs were in lower-paying sectors like retail and food services. Stores hired 30,000 workers, while restaurants added 38,000 employees.
“You’re hiring people, but you’re not generating high-income jobs,” he said. “But work is work. It’s honorable.”
Another positive sign was that the size of the labor force increased, while the total number of unemployed Americans dropped by 83,000 to 11,659,000.
The stock market reacted strongly to the better-than-expected figures, with the Standard & Poor’s 500 index breaking through the 1,600-point level for the first time, rising almost 1 percent at the opening bell. The Dow Jones industrial average was up over 130 points, nearly 1 percent as well.
Economists have been warning that the economy — and job creation — will slow in the second-quarter, largely as a result of fiscal tightening in Washington. Payroll taxes increased in January, and across-the-board spending cuts mandated by Congress went into effect in March, and their impact is expected to be felt more broadly in the months ahead.
And while the private sector has clearly been on the upswing this year, the government continues to represent a drag on job creation, shedding 11,000 jobs during the month. Over all, April’s rate of job creation was still well below the 209,000 jobs added per month in the fourth quarter of 2012.
“In one line: Not bad, especially in the light of beaten-down expectations,” said Ian Shepherdson, chief economist with Pantheon Macroconomic Advisors. “This could have been much worse.”
The manufacturing sector, which is closely watched as a gauge of broader economic strength, was unchanged in April. Private sector job creation totaled 176,000.
With the unemployment rate still well above 6.5 percent, the Federal Reserve haspromised to keep buying billions of dollars of bonds in an effort to help bolster growth. The Fed’s stimulus efforts have helped buoy the markets, but the job picture has remained weak.
Economists also noted that the number of hours worked fell in April, another sign that the economy is having trouble generating enough additional income and jobs to help lift spending.
The government could be the wild card in the coming months. Automatic, across-the-board spending cuts officially went into effect in March, and if the mandated spending cuts continue, layoffs could increase. Apart from the job figures, the economy has been showing signs of weakness of late. Several indicators beginning in March have pointed to much slower growth, with everything from retail sales to manufacturing looking soft recently.
“What’s the biggest drag on the economy? The government,” said Diane Swonk, chief economist for Mesirow Financial in Chicago. “If the government simply did no harm, we could be at escape velocity.”
