U.S. employers added 165,000 jobs in April

Eric Rosenkrantz waits on the unemployment insurance phone at WorkSource Oregon in Tualatin, Ore., Friday, Sept. 2, 2011. (AP / Rick Bowmer)

WASHINGTON -- The U.S. economy showed last month why it remains the envy of industrialized nations: In the face of tax increases and federal spending cuts, employers added a solid 165,000 jobs in April -- and far more in February and March than anyone thought.

The hiring in April drove down the unemployment rate to a four-year low of 7.5 per cent and sent a reassuring sign that the U.S. job market is improving.

The economy is benefiting from a resurgent housing market, rising consumer confidence and the Federal Reserve's stimulus actions, which have helped lower borrowing costs and lift the stock market.

The stock market soared after the Labor Department issued the April jobs report Friday. The Dow Jones industrial average closed up 142 points, or nearly 1 per cent, to a record a record 14,973. It briefly broke 15,000 for the first time.

Coming after a poor March jobs report and some recent data showing economic weakness, the April figures helped ease fears that U.S. hiring might be slumping for a fourth straight year.

"Businesses haven't lost confidence yet," said Sung Won Sohn, an economist at the Martin Smith School of Business at California State University. "Consumers are feeling better. The decent employment gains will add to the optimism and help lift future spending."

The Labor Department revised upward its estimate of job gains in February and March by a combined 114,000. It raised its estimate for February job gains from 268,000 to 332,000 and for March from 88,000 to 138,000.

Excluding May 2010, when the figures were skewed by temporary Census hiring, February's gain was the most since November 2005.

The economy has created an average of 208,000 jobs a month from November through April -- well above the monthly average of 138,000 for the previous six months.

The stronger job growth suggests that the federal budget cutting "does not mean recession," said John Silvia, chief economist at Wells Fargo. "It does not mean a dramatic slowdown."

The unemployment rate edged down from 7.6 per cent in March and has fallen 0.4 percentage point since the start of the year, though it remains high. To help spur borrowing, the Fed has said it plans to keep its benchmark interest rate at a record low near zero at least until unemployment falls to 6.5 per cent.

One cautionary note in the employment report: Most of the biggest job gains were in lower-paying fields, such as hotels and restaurants, which added 45,000 jobs, and retail stores, which added 29,000.

By contrast, construction companies and governments cut jobs. Manufacturing employment was flat.

Some higher-paying sectors added workers. For example, professional and technical services, which include jobs in accounting, engineering and architecture, added 23,000 jobs. Education and health services gained 44,000.

Average hourly pay rose. But because employees in the private sector worked fewer hours, average weekly paychecks declined.

But over the past year, total pay after adjusting for inflation is up a healthy 2.1 per cent, economists said. That should help boost consumer spending in coming months.

The job growth is occurring while the U.S. economy is growing modestly but steadily. It grew at a 2.5 per cent annual rate in the January-March quarter, fueled by the strongest consumer spending in two years.

The housing recovery is helping drive more hiring. Rising home sales and construction help create jobs and increase spending on furniture, landscaping and other services.

One company that's benefited is SolarCity, based in San Mateo, Calif. Rising home building has helped increase demand for the solar-power systems the company installs in homes and businesses.

CEO Lyndon Rive said SolarCity added 177 jobs in April and will welcome its 3,000th employee Monday. It is hiring engineers, installers and administrative support staff and still has 400 openings.

Consumers have been spending more even though their take-home pay was shrunk this year by a Social Security tax increase. On top of that, the economy has been under pressure from the across-the-board government spending cuts that began taking effect March 1. And some small and midsize companies are concerned about new requirements under the federal health care law.

Americans' confidence in the economy jumped last month, lifted by a brighter outlook for hiring and expectations for higher pay, according to the Conference Board, a research group. Cheaper gasoline, the booming stock market and rising home values are also no doubt making people more confident.

The average sales price of a home rose 9.3 per cent in February compared with a year ago, the most in nearly seven years, according to the Standard & Poor's/Case-Shiller 20-city index.

Yet the global economy, by contrast, is slowing. The European Union warned Friday, for example, that the 17 countries that use the euro will shrink by a collective 0.4 per cent this year. And unemployment in the eurozone is 12.1 per cent. In Greece and Spain, it's roughly 27 per cent.

Both Fed Chairman Ben Bernanke and European Central Bank President Mario Draghi have suggested that governments need to focus on stimulating growth and not just on spending cuts and deficit reduction.

Economists have forecast that the U.S. economy will grow roughly 2 per cent this year, below last year's 2.2 per cent. The Congressional Budget Office has estimated that the tax increases and government spending cuts will have shaved about 1.25 percentage points from growth this year. That means that without those measures, the economy could have grown a strong 3.3 per cent in 2013.

Some economists worry that restaurants, retailers and other companies are hiring more part-timers in preparation for the start of health care reform. Companies with more than 50 full-time employees in 2013 will be required to provide health insurance to their full-time staff next year.

Retailers, restaurants and hotels added 48,000 more jobs in February than previously reported. They accounted for three-quarters of that month's revision.

The government revises each month's jobs total twice in the following two months. The revisions occur because many companies in the survey submit their responses late.

Friday's report said the number of people who have been unemployed for more than six months dropped 258,000 to 4.4 million.

Over the past year, the number of long-term unemployed has declined by 687,000. That's down from a peak of 6.7 million in 2010. But it's far above pre-recession levels of about 1.3 million.