The Latest Labor Report Works Up New Optimism
Friday, May 02, 2008SUZANNE PRATT: The U.S. labor market weakened further in April, but the latest report shows it was not as weak as many on Wall Street feared. Non-farm payrolls declined by 20,000 jobs during the month, the fourth straight monthly drop. In another surprising development, the nation`s unemployment rate fell to 5 percent, from 5.1 percent. As Erika Miller reports, some economists are not quite sure what to make of the April data.
ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: The economy lost jobs last month, but Wall Street took comfort in the fact that the damage wasn`t worse. Many economists had predicted four times the number of payroll losses in April. JPMorgan`s Bruce Kasman was also encouraged by where the cuts occurred.
BRUCE KASMAN, CHIEF ECONOMIST, JPMORGAN: We were surprised to some degree by the report. It showed a less significant cutback in hiring, particularly as it showed the hiring continuing to be cut in a very concentrated way in housing and consumer-related industries, showed less spillover to other industries than we had been expecting.
MILLER: There was also an unexpected drop in the unemployment rate, something economist Kathleen Stephansen finds puzzling.
KATHLEEN STEPHANSEN, ECONOMIST, CREDIT SUISSE: I`m not entirely sure why that happened, whether it is statistical noise. I know that even the Labor Department says that there is always quite a bit of error. So it could very well be that this will be going back up the following month.
MILLER: Others think the drop in the unemployment rate could be the result of more people working part time because they couldn`t find full- time positions. Inflation hawks were pleased to see that average hourly earnings rose by just a penny, the smallest gain in roughly two years. But economists say stalling wage growth is actually the most troubling aspect of today`s report.
STEPHANSEN: What I`m worried about is that going forward, the consumer is not as healthy as he or she had been in terms of spending power over the past few years and that will be seen in terms of consumption growth.
MILLER: Adding to those worries about a big slowdown in consumer spending are expectations that the labor market will weaken in the months ahead.
KASMAN: We are looking for job cuts on the order of 50,000 to 100,000 per month, basically between now and the end of the year. So, we continue to see job cuts being a significant part of the economic landscape.
MILLER: Today`s data complicates the debate over whether the nation is at the brink of recession or already in one. But economists say today`s report is raising hopes that things might not get much worse. Erika Miller, NIGHTLY BUSINESS REPORT, New York.
