US payroll figures surge as jobless rate falls to lowest level in 5 years

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The US economy added new jobs in April at the fastest pace in more than two years as non-farm payrolls rose by 288,000, far above Wall Street’s expectations of a 210,000 increase.

The strong jobs report from the Department of Labour supports other recent data that suggested slow economic growth in the first quarter was largely a result of an unusually harsh winter.

February and March jobs data were also revised to show 36,000 more jobs were created than previously reported.

The US unemployment rate fell 0.4 per cent to 6.3 per cent in April, the lowest for more than five years.

However, the data also showed that the lower unemployment rate can be partly explained by an alarming number of people dropping out of the workforce.

The civilian workforce fell by 806,000 in April, following an increase of 503,000 in March. That means the overall US labour force participation rate fell by 0.4 per to 62.8 percent in April, its lowest since last December.

Janet Yellen, head of the Federal Reserve, has said this job-market participation rate is something that concerns the US central bank.

Another negative trend is that wages and working hours were unchanged last month and that average hourly earnings have increased by only 1.9 per cent over the past year.

The strong headline number in April jobs created did, however, support the view from the Fed earlier this week when it said it saw enough growth in economic activity to continue cutting its bond-buying stimulus programme by another $10bn (£5.9bn) a month.

The Fed’s bond buying has helped keep interest rates near zero for five years, as the US economy recovered from the financial crisis.

After Friday’s jobs data, some analysts said that the Fed might now increase interest rates a little sooner than expected, because the economy would soon be strong enough to withstand higher rates.

Before the jobs report, bets were being made on the Fed increasing rates in July of next year, but analysts said rates could now rise perhaps in June.

“The big drop in the unemployment rate may cause some concerns in consideration of what the Fed may do,” said Russell Price, senior economist at Ameriprise Financial.

“But I still think that we’re looking at a second quarter of 2015 likelihood for the first consideration for the hike in the Fed funds’ rate.”