Unemployment Rate Hits 3.9, a Rare Low, as Job Market Becomes More Competitive
5/24/2018 5:27:33 PM
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The Labor Department released its April hiring and unemployment report on Friday, providing the latest snapshot of the economy.
The Numbers
■ The unemployment rate was 3.9 percent, the lowest rate since 2000 and a sign that the job market has become even more competitive. It had been 4.1 percent since October.
2013
2014
2015
2016
2017
2018
thousand
+300
200
100
0
+164,000 April
Monthly change in jobs
■ 164,000 jobs were added last month. Wall Street economists had expected an increase of about 193,000, according to Bloomberg.
■ The Labor Department revised the job figures for February slightly downward, but revised the numbers for March sharply upward. The result was a net increase of 30,000 jobs, compared with previous estimates.
%
+4
2
0
+2.6%
’08
’09
’10
’11
’12
’13
’14
’15
’16
’17
’18
Year-over-year wage growth
■ Average earnings rose by 4 cents an hour last month and are up 2.6 percent over the past year.
The Takeaway
American employers continue to find reasons to expand their payrolls. April marked the 91st consecutive month of job gains, far and away the longest streak of increases on record. The average monthly gain has declined each year since 2014, but that’s normal for an economy that’s been in recovery for such an extended period.
“We’ve continued to add jobs routinely every month for so long, and the unemployment rate we have reached is amazing,” said Catherine Barrera, chief economist of the online job site ZipRecruiter. “It’s very incredible.”
The drop in the unemployment rate may be partly explained by a contraction in the labor force last month. Still, the jobless rate is reaching historically low levels. In the last 60 years, there has been only one sustained period where unemployment stayed below 4 percent: the late 1960s.
Ms. Barrera said it was too early to worry about whether the economy is overheating. When the jobless rate hit these levels right before the dot-com bubble burst, the labor-force participation rate was significantly higher than it is today.
“It’s easy to try to analogize and say that’s what we should be preparing ourselves for right now,” Ms. Barrera said. That kind of thinking might prompt some employers to cut back on investments or hiring, which could begin to slow growth.
President Trump’s flirtation with a trade war has thrust uncertainty into the overall economic picture. The White House has offered little clarity about whether its newly imposed steel and aluminum tariffs will extend to allies like Mexico, Canada and the European Union, and it seems no closer to smoothing over economic tensions with China.
Photo
A worker conducting a test at a CP Industries plant in McKeesport, Pa., which makes steel cylinders to store gases at high pressure. Tariffs on steel and aluminum from China will make raw materials more costly, which has clouded the prospects for extending the nation’s job growth.CreditRoss Mantle for The New York Times
Economists say it is too soon to tell how employers may change their staffing or expansion plans in response to the tariffs on Chinese goods, or to Beijing’s retaliation. But there are signs that companies that buy metals are feeling the effects already. The Institute for Supply Management said this week that manufacturing activity grew in April at its slowest pace since last July.
Uncertainty over the price of raw materials could prompt factories to cut back from their recent hiring spree. Manufacturers added 73,000 jobs in the first quarter, much more than in the same period last year.
Wages and the Fed
Economists expect that low unemployment will lead to increasingly big pay bumps for workers as employers fight over a dwindling number of candidates. But this recovery has so far bucked that conventional wisdom.
Our columnist Andrew Ross Sorkin and his Times colleagues help you make sense of major business and policy headlines — and the power-brokers who shape them.
Wages increased by 2.6 percent over the past year, not much faster than inflation. That modest uptick probably would not prompt the Federal Reserve to raise its benchmark interest rate more aggressively than it has signaled, economists said. Projections released at a Fed meeting this week suggested that officials were leaning toward a total of three rate increases this year.
“Wage growth is just not picking up as we would have expected at this point,” said Matthew Luzzetti, a senior economist at Deutsche Bank. As a result, he said, the Fed will be able “to continue moving gradually.”
One mystery of the American economy is this: How can employers can continue to raise pay so gradually, when the labor market keeps getting tighter? In the 1990s and early 2000s, the last time the job market looked like this, wages for rank-and-file workers rose at an annual rate of around 4 percent.
A host of explanations — ranging from globalization to slow gains in productivity — have been offered to explain the disconnect. Ms. Barrera says businesses may just be stuck in their ways.
“People are creatures of habit,” Ms. Barrera said. “If you have been using a strategy that has been working for you for a number of years, you aren’t going to suddenly change it.”
