Fewest New Jobs In More Than Two Years

GENERIC employment unemployment jobs economy
CBS/AP
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 were added 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 a bit — but not collapsing — as the national economy makes its way through a soft patch.

However, 4.5 percent unemployment still indicates a pretty strong economy, Peter Sperling, professor of finance and economics at Touro College, told CBS News' Dianne James. "The Federal Reserve is not going to stop worrying about inflation pressures with a four-and-a-half percent unemployment rate," he 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.

Against that backdrop, the Federal Reserve is expected to leave a key interest rate at 5.25 percent when it meets next Wednesday. The rate hasn't budged since last August. Before that the Fed had boosted rates for two years to ward off inflation.

"Four-and-a-half percent means that there's no need to stimulate the economy, so they're certainly not going to cut interest rates, so interest rates are likely to stay where they are for some time," said Sperling.

The labor market weakness in April reflected job losses in construction, manufacturing, retailing and financial services. Health care and education, leisure and hospitality, government and various professional and business services were among the sectors adding positions.

The length of workers' job hunt was a bit longer.

The average time the 6.8 million unemployed people spent in their job searches was 17.1 weeks in April, compared with 17.3 in March.

The economy in the January-to-March quarter grew at a feeble pace of 1.3 percent, the weakest in four years. It's the most up-to-date figure on gross domestic product, the best barometer of the country's economic fitness.

Economists predict the economy did better in the current April-to-June period — in the 2 percent range — which would still be considered sluggish. Growth is expected to pick up in the second half of the year. Still, the unemployment rate is expected to climb and reach close to 5 percent by year end.

Federal Reserve Chairman Ben Bernanke believes the economy will avoid falling into a recession this year, although his predecessor, Alan Greenspan, has put the odds at one in three.