Unemployment rate falls to 17-year low even as job market growth slows

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REUTERS/Jonathan Alcorn

  • The US unemployment rate fell below 4% in April for the first time since late 2000, according to the jobs report released on Friday.
  • Job gains were softer than economists had forecast.
  • Wage growth slowed.

The US added fewer jobs than expected in April, but the unemployment rate fell to a 17-year low, according to the Bureau of Labor Statistics’ monthly jobs report released on Friday.

Nonfarm payrolls increased by 164,000. Economists had forecast a rise by 193,000 according to Bloomberg. Job gains in March were revised higher.

The unemployment rate fell to 3.9% after holding steady at 4.1% for six months. It is the lowest level since late 2000.

“That’s good news for workers, as growing labor shortages in tech, skilled trades, and healthcare are putting more workers in the driver’s seat when it comes to negotiating for pay – we expect to see more upward pressure on wages throughout summer 2018 as a result,” Andrew Chamberlain, Glassdoor’s chief economist, said in a note.

unemployment rate 04 18

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Skye Gould/Business Insider; data via FRED

Wage growth has been the story of the jobs report for some time, especially as the unemployment rate has continued to fall to new lows, suggesting that slack in the labor market is also shrinking.

But even with low unemployment and indications that executives are having to pay up for scarce skilled workers, wage growth is still rising slowly and softened last month – average hourly earnings rose by 0.1% month on month and 2.6% year on year. Economists had forecast increases of 0.2% and 2.7%.

Apart from the benefits for workers that higher pay brings, wage growth would lift the overall level of inflation and keep the Federal Reserve on track to continue raising interest rates. The central bank is expected to do so in June and possibly twice more this year after that.

In its latest policy statement, released Wednesday, the Fed acknowledged that inflation had “moved close to 2%,” its target. It had said earlier that the rate of price changes was consistently below that level.

Last month’s report showed that job growth in the first quarter was stronger than in the same period a year ago – a sign that there were still many working-age people on the sidelines of the job market.