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 job growth in April drove down the unemployment rate to a four-year low of 7.5 percent and sent a reassuring sign that the U.S. job market is improving. Coming after a poor jobs report for March, the figures the government issued Friday helped ease fears that U.S. hiring might be slumping this spring for a fourth straight year.
The Labor Department revised up its estimate of job gains in February and March by a combined 114,000. It now says employers added 332,000 jobs in February and 138,000 in March. The economy has created an average of 208,000 jobs a month from November through April — above the 138,000 added in the previous six months.
“This is a good report,” said John Silvia, chief economist at Wells Fargo. “There’s a lot of strength … It’s good for the economy. It’s good for people’s income.”
The stronger job growth suggests that the federal budget cutting “does not mean recession,” Silvia said. “It does not mean a dramatic slowdown.”
The unemployment rate has fallen 0.4 percentage point since the start of the year, though it remains high. The Federal Reserve has said it plans to keep short-term interest rates at record lows at least until unemployment falls to 6.5 percent.
The hiring last month was concentrated in services. Construction companies and governments cut jobs. Home builders added staff, while commercial construction companies cut. Manufacturing employment was flat.
Some higher-paying sectors added workers. Professional and technical services, which includes accounting, engineering and architecture, added 23,000 jobs. Education and health services added 44,000.
One cautionary note in the April 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, which added 29,000. Temporary-help firms gained 31,000 positions.
Average hourly pay rose, but the average workweek for private-sector employees dipped 0.2 hour to 34.4 hours. That meant average weekly paychecks declined.
But over the past year, total pay after adjusting for inflation is up a healthy 2.1 percent, economists said. That increase should fuel consumer spending in coming months.
The job growth is occurring while the U.S. economy is growing modestly but steadily. It expanded at a 2.5 percent annual rate in the January-March quarter, fueled by the strongest consumer spending in two years.
A strong recovery in housing is helping drive more hiring. Rising home sales and construction creates more jobs and spurs more spending on furniture, landscaping and other services.
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 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. Consumers’ confidence and steady spending point to a broader recovery in their financial health that’s easing the impact of the tax increase and raising hopes for sustainable growth.
Households have shed debt. Gasoline has gotten cheaper. Stock market averages are hitting new records.
And home values are up. Prices rose 9.3 percent in February compared with a year ago, the most in nearly seven years, according to the Standard & Poor’s/Case-Shiller 20-city index.
Rising home values have helped restore household wealth. Still, prices nationwide remain about 30 percent below their peak during the housing bubble in 2006. They’re back only to where they were in 2003.
In April, more Americans said they had part-time jobs even though they wanted full-time work. That figure rose 278,000 to 7.9 million, reversing a steep drop the previous month.
Some economists worry that restaurants, retail chains and other companies are hiring more part-time workers in preparation for the implementation 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.
Mark Vitner, an economist at Wells Fargo, said restaurants have been adding jobs even though industry surveys suggest that sales haven’t picked up much.
The revisions to the March and February figures were unusually large. 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 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.