News > Jobs & Economy
Job growth rocks again
Payroll growth of 288,000 comes in well above forecasts; unemployment dips to 5.6 percent.
May 7, 2004: 12:28 PM EDT
By Chris Isidore, CNN/Money senior writer

NEW YORK (CNN/Money) - Employers added jobs at a surprisingly rapid clip for the second straight month in April and the unemployment rate fell, a government report showed Friday, as the nation's labor market finally showed signs of sustained improvement.

While good news for people looking for jobs, the report also makes it much more likely that the Federal Reserve will start raising interest rates sooner rather than later -- which raised some worries on Wall Street.

Payrolls grew by 288,000 jobs last month, the Labor Department reported, well above the 173,000 economists had forecast, according to a survey by Reuters. The number even topped the highest forecasts of about 250,000.

The department also revised its reading on March job growth to 337,000 jobs from the 308,000 reported last month. That gave the economy an average monthly gain of 217,000 a month so far this year, even with weaker-than-expected growth in January and February.

The unemployment rate eased to 5.6 percent from 5.7 percent in March.

After the economy lost 2.7 million jobs from the start of 2001 until August 2003 -- well after the recession ended -- payrolls have now grown for eight straight months, adding 1.1 million jobs.

Job growth in April was widespread.

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CNNfn's Lisa Sylvester reports on strong April employment report showing employers added 288,000 to their payrolls.

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Even the manufacturing sector added 21,000 jobs last month after shedding jobs for 42 straight months -- until a revision showed a gain in the sector each of the last three months.

Construction added 18,000 jobs and retail added 23,000 jobs, while the business and professional services gained 123,000.

The strength of the jobs report was trumpeted by Labor Secretary Elaine Chao.

"This has been an across-the-board gain," said Chao appearing on CNNfn's Market Call. "All that (data) bodes for increased hiring."

But Gene Sperling, economic adviser to Democratic presidential candidate John Kerry, said that the strong April report did not make up for job losses earlier in the Bush administration.

"We're in a very deep hole on job market," Sperling said on the same program. "We've had a couple of steps in the right direction, but we have a lot farther to dig ourselves out."

Still, economists said there definitive signs of strength in the report.


Average hourly wages posted a relatively strong 0.3 percent gain, climbing 5 cents to $15.59 -- the biggest increase since a 6-cent gain last July. Average hours work remained unchanged, but that could also be a sign of renewed strength in the labor market.

"Businesses have regained confidence in the sustainability of this economic expansion and have started to hire people in earnest," wrote Sung Won Sohn, chief economic offficer of Wells Fargo banks. "Employers are trying to boost employment by adding more workers, not more hours per worker."

On Wall Street, stocks were mixed but Treasurybond prices sank after the report as investors bet higher rates were now a foregone conclusion. The yield on the 10-year Treasury jumped to 4.75 percent from 4.60 percent late Thursday. Bond prices and yields move in opposite directions.

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John Silvia, chief economist at Wachovia Securities, said he was surprised to see stock investors trying to find positive news in the numbers, rather than focusing just on the risks that accompany higher rates.

"They're looking at the growth in the economy and the earnings. They've bought into the fact the economy is growing," he said.

Investors were betting that it is now virtually certain that the Fed will raise its target for a key short-term rate when the central bank's policy-makers meet in June, rather than waiting for August or September.

Traders at the Chicago Board of Trade Friday were betting on a 90 percent chance the Fed would raise the fed-funds rate a quarter point in June, up from a 56 percent chance Thursday and a 42 percent chance on Tuesday immediately after the Fed meeting.

But several economists cautioned that the Fed will weigh more economic data -- particuarly on inflation -- before starting to raise the fed funds rate. The overnight bank lending rate stands at 1 percent, the lowest in more than 40 years.

While the March employment report had started to raise expectations for a Fed rate hike, some analysts thought the number was a fluke.

"The two months of favorable data allow us to start connecting the dots," said Anthony Chan, chief economist for Banc One Investment Advisors. "It gives us a picture of a rapidly improving labor market. I think we can categorically say we have seen a sea change in labor market environment at this time."

Department of Labor (DOL)

Chan said it's too soon to suggest that a Fed rate hike at the June meeting is certain. He said central bank policy-makers will look at information beyond the headline job creation number.

Economists said that upcoming reports on retail and wholesale prices are more important that the employment reports for the Fed, which is mandated to control inflation and keep the economy growing.

"Next week's producer price index or consumer price index could tip the Fed in favor of a June hike if they're on the upside," said Chan.  Top of page

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