Employment outlook takes an encouraging turn

Employers nationwide added more jobs than expected last month and the unemployment rate fell to its lowest level since late 2008, taming concerns that the US economy is sputtering.

The Department of Labor said Friday that companies increased payrolls by 165,000 jobs in April — better than most economists expected and enough to drop the jobless rate from 7.6 percent to 7.5 percent.

Perhaps more significantly, labor officials also made revisions to the February and March numbers that showed more job gains than had been previously reported. Combined, the data offered evidence that the effects of mandatory cuts in federal government spending have so far been minimal.


“It’s a good report with a lot of good news,” said Nariman Behravesh, chief economist at IHS Global Insight, a forecasting firm in Lexington. “There’s more strength in the economy than previously thought.”

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The brightening economic picture cheered investors, with the Dow Jones Industrial Average rising 142 points to record-high 14,973 after briefly crossing the 15,000 mark for the first time earlier in the day. The Standard & Poor’s 500-stock index closed at 1,614, another milestone.

Friday’s report painted a dramatically different picture of the nation’s economy than the March summary, which showed a sharp slowdown in hiring. The unemployment rate also declined in March, but for a troubling reason: nearly 500,000 people gave up looking for work and thus were not included.

By contrast, Friday’s report found some discouraged job seekers were looking again, an indication they are more optimistic about the economy.

Sectors that added the most jobs in April included professional and business services, leisure and hospitality, and health care. Areas that suffered losses included construction, information businesses, and the federal government, which cut 11,000 positions in April.


The slowdown in construction jobs — about 6,000 were lost — will be watched especially closely. This week the S&P/Case-Shiller Home Price Indices, considered a reliable indicator of the housing market, said February home values rose by an average of 9.3 percent in the 20 cities it measures, compared with the same period last year. It was the second consecutive month of improving values in all 20 cities. If that trend continues, the number of home construction jobs would be expected to increase.

The Labor Department revises and hones its monthly job calculations as new information becomes available, and some of the most surprising changes involved major reworkings of past months’ estimates. Employers added 138,000 jobs in March, up markedly from the government’s initial estimate of 88,000. The February estimate of 268,000 jobs jumped to 332,000, the biggest monthly job gain since November 2005.

Robert Murphy, an economist at Boston College, said the numbers were better than predicted, but said he was unsure whether job growth could be sustained.

In both 2010 and 2011, healthy employment gains made during early months did not play out for the rest of the year, he noted. He said he is concerned that a deepening recession in Europe could inhibit US sales and exports to Europe, bringing about another late spring swoon.

Murphy also said job creation needs to pick up to make a larger dent in the unemployment rate. Joblessness has been slowly declining in recent months but remains high. Because of that, he said, the Federal Reserve should continue its stimulus efforts, which have kept interest rates at historic lows.


At the conclusion of a two-day policy meeting earlier this week, the Fed indicated it will stay the course.

“It would be wrong now for federal policy makers to say, ‘Hey let’s take our foot off the accelerator,’” Murphy said. “We are four years since the end of the recession and we still haven’t experienced the kind of growth you usually see coming out.”

But many economists and other analysts had expected recently enacted federal spending cuts to take a bigger toll on job creation. For example, payroll provider ADP and Moody’s Analytics, a forecasting firm in Pennsylvania, predicted private sector job growth in April of just 119,000.

Sung Won Sohn, an economist at Economics at California State University Channel Islands, said businesses appeared to shrug off the impact of reductions in federal spending. Sohn said all indicators, including consumer confidence, point to an economy that is “coming out of a soft patch.”

Analysts said recent stock market gains and rising home values are convincing people to spend more freely after years of holding back, especially on major purchases such as autos. Such spending is crucial because it accounts for about two-thirds of the country’s gross domestic product.

“Consumers are not about to let the economy down,” Sohn said. “Spending will be maintained, in part because of considerable pent-up demand.”

Megan Woolhouse can be reached at Follow her on Twitter @megwoolhouse.