American employers added fewer workers than forecast in April and the jobless rate unexpectedly fell as people left the labor force, adding to concern the economic expansion is cooling.
Payrolls climbed 115,000, the smallest increase in six months, after a revised 154,000 gain in March that was larger than initially estimated, Labor Department figures showed today in Washington. The median estimate of 85 economists surveyed by Bloomberg News called for a 160,000 advance. The jobless rate fell to a three-year low of 8.1 percent, and earnings stagnated.
Stocks and bond yields fell on bets that a slowdown in hiring will restrain the wage growth needed to fuel the consumer spending that accounts for 70 percent of the world’s largest economy. The data pose a challenge for President Barack Obama, who was attacked by Republican challenger Mitt Romney’s campaign today for his “failed economic record.”
“We’re still very much on the recovery path, but we’ve got a huge amount of ground to make up in the labor market,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, who accurately forecast the unemployment rate.
The Standard & Poor’s 500 Index dropped 1.6 percent to 1,369.95 at 3:27 p.m. in New York. The yield on the 10-year Treasury note fell to 1.87 percent from 1.93 percent late yesterday.
Weakening consumer confidence is hurting sales at businesses like Tops American Grill, Bakery & Bar in Schenectady, New York.
No Plans to Hire
Evan Christou, the owner, said he has no plans to add to his staff of 42 employees. Sales were up about 6 percent earlier this year before dropping off when gasoline prices went up. He said he would need to see a significant increase in sales for a sustained period before hiring more workers.
“We’re kind of consolidating and multitasking,” said Christou, 49. “In this market, it’s pretty much a wait-and-see attitude.”
Transportation and warehousing, government agencies and construction all cut jobs in April. Bloomberg survey estimates ranged from increases of 89,000 to 210,000 after a previously reported 120,000 rise in March.
The data come a day before Obama formally opens his re- election campaign with rallies in the swing states of Ohio and Virginia. Romney has made the president’s stewardship of the economy a point of attack and polls show voters are focused on jobs and growth.
“From green jobs that never materialized to an unemployment rate that has remained above 8 percent for 39 straight months, President Obama’s rhetoric simply doesn’t match with his failed economic record,” Andrea Saul, a Romney Campaign spokeswoman, said in a statement.
Alan Krueger, chairman of Obama’s Council of Economic Advisers, focused on 26 consecutive months of private job growth. Today’s report “provides further evidence that the economy is continuing to heal from the worst economic downturn since the Great Depression,” he said in a statement.
Private payrolls during Obama’s term in office turned to positive from negative in April, with a net gain of 35,000. Overall payrolls remain lower than when Obama was inaugurated because there are 607,000 fewer government workers, including federal, state and local employees.
Edward LaHaie, 52, of Powder Springs, Georgia, got a job in April as a regional sales manager for Rawal Devices Inc., a maker of control systems for industrial and commercial air conditioners. He had been out of work since November when he lost a similar sales job.
Counted the Days
“There are always opportunities for someone who has skills,” he said. “It took a little longer than I would have liked. I was unemployed for 170 days and I counted every one of them.”
The Obama campaign is pointing to a revival in the auto industry to support his record.
Chrysler Group LLC, the automaker controlled by Fiat SpA, said it will accelerate the addition of 1,100 jobs and a third crew of workers by hiring them in November, pulling ahead plans for increasing production in early 2013. Earlier this week, it also said four plants will skip normally scheduled two-week midyear shutdowns to meet increased demand.
At the same time, cost-cutting is prompting reductions at some companies. H&R Block Inc. (HRB:US), the biggest U.S. tax preparer, plans to reduce 350 jobs and close about 200 company-owned offices. AMR Corp.’s American Airlines this month said it will eliminate 1,200 airport agent, baggage and cargo jobs as part of a bankruptcy restructuring plan to trim annual labor spending.
Economists pointed to some bright spots in today’s report. Payroll gains for the prior two months were revised higher by a total of 53,000 jobs. And some of the slowdown may reflect unusually warm weather that boosted hiring early in the year.
“The weather was mild in January and February, and it’s very possible that hiring was pulled forward,” said Christophe Barraud, an economist and strategist at Market Securities Paris LLP, who correctly forecast the payrolls figure. “This report is not good, but we have to wait for the next one to see if the real trend is actually decelerating.”
The unemployment rate was forecast to hold at 8.2 percent, according to the survey median. It has exceeded 8 percent since February 2009, the longest such stretch since monthly records began in 1948.
The participation rate, which indicates the share of working-age people in the labor force, fell to 63.6 percent, the lowest since December 1981, from 63.8 percent.
The report showed a drop in long-term unemployed Americans. The number of people out of work for 27 weeks or longer fell as a percentage of all jobless, to 41.3 percent.
Among those still looking for work is David Bouchey, of Aurora, Colorado, who lost his job as a financial analyst in 2007. He said he thought his years of experience in the industry and three post-graduate degrees would land him a job.
“I’m overqualified for almost every job I apply for,” said Bouchey, 54. He, his wife and two sons live on about $1,000 a month in public assistance. “I never thought the economy would be this bad.”
Average hourly earnings were $23.38 in April, essentially unchanged from the month before, today’s report showed. It was the first time without an increase since August. Compared with April of last year, earnings climbed 1.8 percent, matching January as the smallest in a year. The average work week for all workers held at 34.5 hours.
Faster economic growth would help lay the groundwork for more hiring. The economy expanded at a 2.2 percent annual rate in the first quarter after a 3 percent pace the prior three months, the Commerce Department reported last week. Consumer spending grew 2.9 percent, the most in more than a year.
The improvement in the U.S. contrasts with some of the other major economies. Joblessness in the 17-nation euro area increased to 10.9 percent in March, the highest since April 1997, from 10.8 percent a month earlier, data showed this week.
United Parcel Service Inc. (UPS:US), the world’s largest package- delivery company, is among firms taking note.
“During the quarter, the most positive news has come from the U.S. where indications of economic rebound are evident,” Scott Davis, chief executive officer of UPS, said on an April 26 conference call. “Retail sales have grown faster than expected and the employment environment has improved. On the other hand, economies in other parts of the world continue to face challenges.”
Federal Reserve policy makers last month repeated their plan to hold borrowing costs low through late 2014 to spur growth.
“The unemployment rate has declined but remains elevated,” Fed policy makers said in an April 25 statement. The group “expects economic growth to remain moderate over coming quarters and then to pick up gradually,” and “anticipates that the unemployment rate will decline gradually.”
Today’s report showed that factory payrolls increased by 16,000, the smallest in five months. Construction companies cut jobs for a third straight month. Retailers added 29,300 employees, almost recouping losses in the prior two months. Employment gains at service-providers were the weakest since August. Government payrolls declined for the seventh month in the last eight.
The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- held at 14.5 percent.
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