The US is close to full employment, but because of population growth and immigration, the US economy must create a large number of jobs each month to stand still. The employment situation is a critical factor in determining if/when the Federal Reserve will make its next incremental increase in interest rates along the long road towards normalisation of interest rate policy.
Data from job creation in April would suggest that a rate hike remains on the cards for next month. April saw the US economy generate 211000 new positions which beat analysts’ expectations. For the reasons stated above, the new impulse of jobs changed the unemployment figure only marginally, moving it from 4.5% (March) to 4.4% for last month. The maintenance rate for job creation is believed to be in the range from 75000 to 100000, so the April figure represents demand over and above this tick-over level. It balances the weak job creation figure seen in March which came in at a disappointing 79000 new positions.
The current level of unemployment is the best seen since before the Global Financial Crisis hit its stride and is the lowest value in a decade since May 2007. Job creation was strongest in the leisure and hospitality sectors; financial sector; healthcare; social assistance; and mining sector. Wage growth for the year to April came in at 2.5%, fractionally above the current inflation figure of 2.4%.
The recent job creation figures put the average monthly figure at 185000 which is broadly the level seen in the final year of the Obama administration. The relatively weak Q1 reading of US economic growth of 0.7% (annualised) was dismissed as being a transient blip. Decent job creation figures (against a background of near full employment) would suggest that this analysis is correct.