Hiring in U.S. Kicks Into Higher Gear as Unemployment Fal

The labor market shifted into a higher gear in April with payroll gains showing the most widespread advance in two years, a sign the U.S. economic expansion is on the verge of speeding up.

The 288,000 increase in employment marked the biggest upside surprise since February 2012 and followed a 203,000 rise the prior month, Labor Department figures showed yesterday in Washington. An index measuring the share of industries hiring climbed to 67, the highest level since January 2012. The jobless rate dropped to 6.3 percent, the lowest since September 2008.

“Pretty much every major industry added employment and added a lot of jobs, too, so that was a really encouraging part of the report,” said Sarah House, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “Maybe some of the slowdown we saw this past winter was indeed just weather-related, and now that people have been back in the office and gotten back to business, they’re adding to payrolls.”

Hiring accelerated at manufacturers, builders and service providers after households spent more freely as the first quarter drew to a close, showing the economy is perking up following a winter slump. The report was not without pockets of weakness as workforce participation matched a 36-year low and hourly wages failed to rise.

The decline in participation came as the number of people entering into the workforce -- by either landing a job or starting a search for work -- plunged to 5.84 million in April, the fewest since November 2008, according to figures from the Labor Department. The 14 percent decrease from the prior month’s 6.79 million was the biggest since 1995.

Late Easter

The survey of households, which covered the period from April 6 to April 12, was more than a week before the Easter holiday. That means the government’s polling probably missed capturing the arrival of prospective seasonal workers later in the month.

“The people we traditionally expect to see flowing into the workforce this time of year have not entered,” Labor Secretary Thomas Perez, said in an interview. The participation rate has been “bouncing around” and is little changed over the past six months, he said, and it’s still something that bears watching carefully.

Stocks fell, after an early rally sent the Standard & Poor’s 500 Index above its closing record, as concern about escalating tension in Ukraine overshadowed the jump in payrolls. The S&P 500 dropped 0.1 percent to 1,881.14 yesterday in New York. The yield on the benchmark 10-year Treasury note fell to 2.58 percent from 2.61 percent late a day earlier.

Federal Reserve

The jobs figures corroborate the Federal Reserve’s view that the economy is rebounding from the weakest growth rate in a year, indicating central bankers will keep trimming stimulus.

“The soft patch is over, and the strong U.S. recovery will continue,” said Laura Eaton, an economist at Fathom Financial Consulting in London, whose firm’s projection of 250,000 jobs added was among the closest in the Bloomberg survey.

The median forecast of 94 economists called for a 218,000 advance. Forecasts for April payrolls ranged from increases of 155,000 to 292,000.

The difference between the increase in payrolls and the average estimate of economists was 3.56 times larger than the poll’s standard deviation, or the average divergence between what each economist forecast and the mean.

“I think it would be hard, on a sustainable basis, to do much better than the low 200s on payrolls,” said Raymond Stone, managing director of Stone & McCarthy Research Associates in Princeton, New Jersey, whose forecast for a 250,000 rise in payrolls was among the closest in the Bloomberg survey. “I wouldn’t expect this to be repeated in May.”

Last Year

Last year, the U.S. added more than 194,000 jobs each month, compared with about 186,000 in 2012. Economists surveyed by Bloomberg on April 4-9 project payroll gains to match 2013.

Goods-producing industries put 53,000 more workers on staff as hiring picked up at construction companies, manufacturers and mining companies. Service providers saw payrolls climb by 235,000, with retailers, temporary-help agencies, health-care firms and government offices all showing gains.

As a human resources specialist, Alan Janzen has first-hand knowledge of the improvement in the labor market. He started a job this week with the city of San Antonio after working as a personal trainer. He sent out 27 applications since beginning his job hunt in February.

“I expected it to be a long and frustrating search, from everything I hear,” said Janzen, 31, who has a master’s degree in human resources.

Ford Motor Co. (F) is among companies growing more optimistic. Boosted by record profits in North America, the second-largest automaker said it will probably hire more than the 12,000 new workers it promised in its 2011 contract with the United Auto Workers union.

Growing Sales

“The business has grown faster than we predicted it would in 2011,” Joe Hinrichs, Ford’s president of the Americas, said in an interview on April 30. The company said it hired 2,000 new workers at its factory in Claycomo, Missouri, and that it’s completed about 75 percent of its commitment to hire 12,000 workers by 2015.

One cloud in yesterday’s figures was worker pay, which is stagnating. Average hourly earnings held at $24.31 in April, and were up 1.9 percent over the past 12 months, the smallest gain this year.

The drop in the unemployment rate from March’s 6.7 percent was the biggest since December 2010 and came as the agency’s survey of households showed the labor force shrank by more the 800,000 in April. The participation rate, which indicates the share of working-age people in the labor force, decreased to 62.8 percent, matching the lowest level since March 1978, from 63.2 percent a month earlier.

Fed Challenge

Reconciling such data, in the context of stronger employment gains, presents a challenge to Fed policy makers as they try to determine when to begin raising interest rates. Central bankers at this week’s meeting said the economy is showing signs of picking up and the job market is improving. The Fed’s Open Market Committee pared its monthly asset-buying to $45 billion, its fourth straight $10 billion cut, and said further reductions in “measured steps” are likely.

“Yellen’s dashboard still looks abysmal in today’s data, with labor force participation falling, long-term unemployment still stubbornly high -- and could be improving for the wrong reasons -- and those working part-time instead of full-time for economic reasons unchanged,” said Diane Swonk, chief economist at Chicago-based Mesirow Financial Inc. “Wage pressures remain nonexistent, further testimony that her dashboard of labor market slack is accurate.”

Only two of the nine gauges used by Yellen to gauge the health of the labor market -- payroll growth and layoffs -- are back to where they were in the four years leading up to the last economic downturn.

Economy Stalls

Gross domestic product rose at a 0.1 percent annualized rate from January through March, compared with a 2.6 percent gain in the prior quarter, the Commerce Department said earlier this week.

“Growth in economic activity has picked up recently, after having slowed sharply,” the Fed said this week in a statement following their meeting in Washington. “Household spending appears to be rising more quickly.”

Household purchases, which account for about 70 percent of the economy, climbed 0.9 percent in March, the most since August 2009, the Commerce Department said earlier in the week. Incomes increased by the most in seven months.

The jobs report “completely justifies the Fed’s statement this week that there is an improved assessment, things are looking better,” said Lindsey Piegza, the Chicago-based chief economist at Sterne Agee & Leach Inc. “This sets the Fed up for taking baby steps.”

To contact the reporter on this story: Michelle Jamrisko in Washington at mjamrisko@bloomberg.net

To contact the editor responsible for this story: Carlos Torres at ctorres2@bloomberg.net Vince Golle

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