April jobs report could help answer that key question
WASHINGTON—The government’s April jobs report being released Friday could bring some clarity to a fuzzy picture of the U.S. economy.
The economy likely shrank during the first three months of the year. And hiring slowed sharply in March.
Economists have pointed mainly to temporary factors, especially harsh winter weather that kept consumers away from shops earlier this year. A labour dispute at West Coast ports also delayed shipments of parts and contributed to a sharp drop in exports.
Analysts have forecast that job growth rebounded in April to 222,500, according to a survey by FactSet, from 126,000 in March. The March gain was the weakest in 15 months. Economists have also forecast that the unemployment rate dipped last month to 5.4 per cent from 5.5 per cent in March.
The dollar has appreciated about 15 per cent in the past year against other currencies, such as the euro and Japanese yen. That trend has made U.S. goods more expensive overseas and could slow export sales this year.
And the roughly 50 per cent drop in oil prices from last June through January has led to sharp cutbacks in oil and gas drilling by energy companies. That trend has reduced investment in steel pipe and other equipment and slowed growth. Most economists expect that pattern to continue until summer.
Employers have added more than 3 million jobs over the past 12 months, a healthy pace. But some of the fastest-growing sectors involve mainly low-paying work, such as restaurants, retail and home health care.
The economy would benefit from more jobs in higher-paying sectors. But positions in the oil and gas industry dropped in the first three months of this year. And manufacturing jobs declined in March for the first time in nearly two years.
April’s jobs report should shed light on whether the first quarter’s slump was temporary or whether a more persistent weakness is holding back the economy.
Recent economic indicators have provided support to both views.
Home sales staged a big comeback in March, a possible sign that more Americans are eager to make expensive purchases. People bought existing homes at an annual pace of 5.19 million, the National Association of Realtors said. Those gains are expected to extend into April based on figures on signed contracts released by the Realtors. This would help spur additional growth in the construction sector as builders seek to meet demand.
And service firms, such as restaurants, retailers and banks, grew at a faster pace in April than in March, according to a survey by the Institute for Supply Management, a trade group of purchasing managers. That suggests that Americans stepped up their spending as the weather improved.
In addition, the average number of people seeking unemployment benefits each week over the past month fell to its lowest level in 15 years, the Labor Department said Thursday. Applications are a proxy for layoffs, so the very low level suggests that companies haven’t been spooked by slower growth and are retaining their staffs. That typically suggests that hiring is healthy.
Yet a survey of manufacturing companies, also by the ISM, saw little improvement in April. That is evidence that the strong dollar is still weighing on U.S. exports.
And the trade deficit widened in March, creating a drag on the nation’s gross domestic product. Imports climbed after the West Coast ports dispute was settled. U.S. exports barely nudged up. The trade gap shot up 43 per cent from February, the government said.