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May 04, 2007

Jobless Rate Edges Up As Hiring Slows

Slows, but hardly stops. Not every jobs report can be a gem. Considering the dramatic slowdown in housing, the rest of the economy is weathering the storm as well as could be expected.

The nation's unemployment rate edged up to 4.5 percent in April as cautious employers added the fewest new jobs in more than two years, signaling that the labor market is starting to feel some of the strain of the sluggish economy.

The fresh employment picture provided by the Labor Department on Friday showed that payrolls grew by just 88,000 last month as job losses spread beyond manufacturing and construction and into retailing and financial services. Workers' paycheck also grew more slowly.

The new tally of jobs added to the economy was the fewest since 65,000 jobs in November 2004. The rise in the unemployment rate, however, was slight compared with March's 4.4 percent rate -- which had matched a five-year low. Taken together the figures suggest the labor market may be cooling -- but not collapsing -- as the national economy makes its way through a soft patch.


Still, from the overall economic perspective, the slight slowing in hiring isn't worrisome, she said. "The numbers suggest some of the slowing in the economy is spilling over into the labor market but not in a major way," Reaser said.


Economists were predicting the unemployment rate would nudge up to 4.5 percent. However, they expected job growth to be a bit stronger, with employers adding around 100,000 new jobs to their ranks. Even with the fractional rise in the overall rate, joblessness in the 4 percent to 5 percent is relatively low by historical standards.

The new report also showed that job gains in February and March turned out to be a bit weaker than previously reported.

Employers added 90,000 positions in February, versus the 113,000 reported last month. Payrolls grew by 177,000 in March, slightly less than the 180,000 previously reported.

Workers' wages grew more slowly.

Average hourly earnings rose to $17.25 in April, a 0.2 percent increase from March. Economists were expecting a modest 0.3 percent rise. Over the past 12 months, wages grew by 3.7 percent, the slowest annual increase in a year.

Wage growth is important for worker and supports consumer spending, a vital ingredient to the economy's good health. But a rapid pickup -- if not blunted by other economic forces -- can fan fears about inflation. The slower growth in wages could ease Federal Reserve fears that inflation might not recede as they have predicted.

One positive, it seems to me, is that companies have been hiring and expanding conservatively throughout this expansion -- we have not seen, at least not yet, the overoptimistic hiring and spending binges that produce big numbers towards the end of a business cycle, followed, of course, by a major crash and a recession. The year 2000 bust seems to be freshly remembered by most, restraining the economic bad behavior that preceeds a recession, so perhaps this cycle's "recession," if there is to be one, won't be a true recession at all -- just a sluggish period rather than an actual contraction.

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posted by Ace at 12:13 PM

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