US jobless rate at new low

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The Independent Online
THE US unemployment rate tumbled to a 28-year low of 4.3 per cent in April as the supercharged American economy churned out 262,000 new jobs, with only manufacturing showing any ill effects from the Asian currency crisis.

The unemployment rate was down from 4.7 per cent in March. Meanwhile, payroll employment outside the farm sector grew last month by a brisk 262,000, recovering from a revised 24,000 decline in jobs in March.

While the payroll employment gain was just slightly above the 259,000 Wall Street economists had expected, the steep drop in the unemployment rate was a surprise and helped to push prices down in the US bond market.

In addition to hitting its lowest level since February 1970, the jobless rate posted its largest one-month point drop since May 1994.

The 0.4 percentage point drop in the unemployment rate underscored just how strong the US economy remains and is likely to increase pressure on the Federal Reserve to start raising interest rates to cool things down to prevent inflation from re-igniting.

"We now have a labour market that is as tight as can be," said Robert Dederick, economist at Northern Trust in Chicago. "You have to reach into the nooks and crannies to get workers in the United States now."

Cynthia Latta, an economist at Standard and Poor's DRI, said yesterday's report made a Fed rate hike much more likely. She noted that the closely watched figure on hourly earnings showed wages were 4.4 percent higher than a year ago, a level she said would cause concern at the central bank about wage pressures.

Wall Street, which has seesawed in recent weeks over rising and falling concerns about Fed rate hikes, shrugged off jitters over monetary policy and toasted news that the economy was in great shape. By mid-morning in New York, the Dow Jones industrial average was up almost 90 points at 9066.

The US job market, which has been exceptionally strong over the past year, hit a bout of weakness in March as cooler-than-normal weather put a damper on hiring in construction and other industries.

Hiring made a strong comeback, with job gains occurring in a number of key industries led by services. However, the manufacturing sector lost 10,000 jobs in April following a 7,000 decline in March.

Workers continued to rack up steady increases in their pay rates. Average hourly earnings rose by 4 cents to $12.67. Year-on-year, average hourly earnings were up 4.4 percent, the biggest increase since a matching 12- month rise in November 1983.

The rise in earnings was another negative factor for the bond market, as it further underlined fears of wage inflation.

"The thing that really sticks out is the average hourly earnings, for which we had been told to expect a low number ... We got a high number," said Simon Cook, head of trading at Co-operative Bank in London.