U.S. Labor Picture Improved In April

Job Growth Suggests Stronger Economy

Job growth surged last month as employers expanded their payrolls, suggesting that businesses remained upbeat about the economy despite its recent softness.

The nation's unemployment rate held steady at 5.2 percent in April as employers hired 274,000 additional workers, the Labor Department reported yesterday. The government also boosted its job counts for February and March.

Employers have added an average 211,000 jobs a month this year, picking up the pace from last year's monthly average of 183,000. That faster pace should bring the jobless rate down over time.

The April job report appeared to reflect the economy's underlying good health, even though it followed a string of other data showing the expansion had lost steam in recent months, analysts said. U.S. economic growth slowed sharply in the January through March quarter, to a 3.1 percent annual rate, the lowest in two years, as energy costs rose, businesses and consumers pulled back on spending, and the trade deficit widened.

The firm labor market "does suggest that the economy may not be as weak as many previously expected," said Richard Yamarone, chief of economic research at Argus Research Corp. "If businesses are truly worried about sluggish demand, lofty energy prices and higher interest rates, they wouldn't engage in the costly practice of adding workers at such an elevated rate."

Stock prices were little changed after the report was released. Stronger hiring could mean bigger profits for companies that benefit from the extra household spending, but it also makes it more likely the Federal Reserve will keep steadily raising interest rates to keep inflation in check.

Another Fed interest rate increase in June is "a virtual certainty," said Peter E. Kretzmer, senior economist for Bank of America Corp., echoing the sentiments of other analysts.

Fed officials raised their benchmark short-term interest rate to 3 percent Tuesday and signaled that they plan to keep moving it gradually higher in the months ahead. In a statement issued after their meeting, the policymakers noted both the spending slump and rising inflation pressures.

The job report is likely to confirm the Fed's belief that the economic expansion remains solid and self-sustaining, a situation in which rising employment creates more demand, prompting businesses to hire more workers, and so on. That means the economy no longer needs the added stimulus of very low interest rates, justifying the Fed's plan to raise them enough to keep inflation contained.

The labor market has improved gradually after several years of job losses followed by sluggish employment growth and lackluster wage gains for most workers. Employers have been adding workers every month since June 2003, but it was not until January of this year that they had restored all the jobs lost during the 2001 recession and initial "jobless recovery" that followed.

Fed officials are watching closely to see whether rising labor costs -- including wages and benefits -- fuel more inflation.

Businesses' total labor costs per unit of output rose at a 2.2 percent annual rate in the first three months of this year, after increasing 0.4 percent in all of last year and declining the previous two years, the department said last week.