Unemployment Rate Drops to 3.9%

This morning, the government reported that the U.S. economy created 164,000 net new jobs last month. The unemployment rate fell to 3.9%. That’s the lowest rate in 17 years. In fact, this is very close to the lowest rate since the 1960s.

Economists surveyed by Reuters had expected payroll growth of 192,000 and the jobless rate to drop by one-tenth of a percent to 4.0 percent. The official jobs tally initially showed an increase of an upwardly revised 135,000 in March.

Stock market futures moved lower following the release, while government bond yields also drifted downward.

“The expectations were a little bit elevated going into this probably just because last month’s report was a little bit weaker,” said Charlie Ripley, senior investment strategist at Allianz Investment Management. “Net-net this was a little bit softer than people were expecting. this goes into a lot of the other data that we’ve been seeing … a little bit of a soft patch.”

The closely watched average hourly earnings number rose by 4 cents, equating to a 2.6 percent annualized gain, a bit off the pace from the previous month. The average work week was unchanged at 34.1 hours.

Despite having a similar unemployment rate as April 2000 (3.8% vs. 3.9%), in order to have a similar jobs-to-population ratio as 17 years ago, April 2018 would need 11.4 million more jobs, or 17.6 million fewer people.

In the last year, average hourly earnings are up 2.56%. Here’s the unemployment rate with a red line at 3.8%.

Here’s nonfarm payrolls along with the S&P 500.

Posted by on May 4th, 2018 at 8:47 am


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