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Jobs: Boom or blip?
April job growth soars but economists split on whether the labor market is back.
May 6, 2005: 10:38 AM EDT
By Chris Isidore, CNN/Money senior writer
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NEW YORK (CNN/Money) - Job growth took off in April and was stronger than originally thought in February and March, the government said Friday in a report that flew in the face of recent fears of a slowing U.S. economy.

The Labor Department said employers added 274,000 jobs to payrolls last month, up from a revised 146,000 gain in March. Economists surveyed by had forecast a 170,000 gain in April.

The unemployment rate remained at 5.2 percent, meeting economists' forecast.

The report comes amid growing concern about the strength of the world's largest economy heading into summer. There had been some speculation the Federal Reserve might even pause from its quarter-point rate hikes due to concerns about the economy, which grew at the slowest pace in two years in the first quarter.

On Wall Street, stocks rose and Treasury bond prices fell after the report as investors bet there is now almost no chance of a pause at the next Fed meeting in late June.

Analysts were split about whether the recent burst in job growth would continue.

"Although it may be too soon to conclude that the soft patch is no more, today's impressive job figure does suggest that the slowdown may not be everlasting," said Anthony Chan, senior economist with JPMorgan Asset Management, who had forecast a gain of 160,000 jobs.

The April payroll number wasn't the only one showing unexpected strength. The March employment gain was revised up from an initial reading of 110,000 new jobs, and the February rate was revised up to 300,000 from 243,000.

Job growth now has averaged 240,000 jobs over the last three months, the best three-month performance the period ended last May.

But the strong three months of jobs gain a year ago was quickly followed by a string of disappointing job gains. Some economists said that despite the strong number Friday, it's too soon to say the labor market has turned the corner.

"You can't deny it was impressive and desirable. But at the same time you have to throw in unsustainable," said Rich Yamarone, director of economic research at Argus Research, who had one of the most bearish estimates among economists, with a forecast of only 140,000 new jobs.

"Clearly with the economy in an oil-induced soft patch, you're not going to be creating 274,000 jobs every month," he added. "All the other economic data -- durable goods slumping, higher prices -- all these things we're experiencing don't make a desirable hiring climate."

But Chan and some other economists pointed to other signs of a strengthening labor market.

The average hourly work week rose 0.2 hours to 33.9 -- a sign that employers are already stretching their current work force and may need to step up hiring in the months ahead.

"In the past, that (increase in work week) has pointed to fact we'll see strong job growth in next few months," said Mark Vitner of Wachovia Securities. He said the recent pace of job growth might not be sustainable but he's still expecting solid job growth of about 220,000 a month for 2005. Job growth has averaged 211,000 a month year-to-date.

Another sign of a improving labor market is rising wages.

The seasonally adjusted average weekly wage rose $4.88, or 0.9 percent, to $542.40 -- the biggest percentage rise since August of 1997. The average hourly wage rose far more modest 5 cents, or 0.3 percent, to $16, similar to the gain posted in March.

The increases left hourly wages up 2.7 percent over the last year and weekly wages up 3.3 percent over the period. By comparison, the department's Consumer Price Index, the government's main inflation gauge, rose 3.1 percent for the 12 months ended in March.

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