WASHINGTON -- U.S. job growth increased at its fastest pace in more than two years in April, suggesting a sharp rebound in economic activity early in the second quarter.
Nonfarm payrolls surged 288,000 last month, the Labor Department said Friday. That was the largest gain since January 2012 and beat Wall Street's expectations for an increase of 210,000. March and February data were revised to show 36,000 more jobs than previously reported.
"The economy really has strong underlying fundamentals supporting its growth. Temporary headwinds such as the bad weather can be certainly managed," said Russell Price, senior economist at Ameriprise Financial in Troy, Michigan.
Still, the report did give some worrisome signals on the economy's health.
While the unemployment rate dived 0.4 percentage point to a 5½ year low of 6.3 percent, part of the decline was because hundreds of thousands of people left the labor force.
Overall, however, the data suggested the economy was gathering strength and led investors to pull forward their bets on when the Federal Reserve will raise interest rates.
U.S. Treasury debt yields soared after the report, while the dollar jumped to session highs against the euro and the yen. U.S. stock prices rose marginally.
Bets on U.S. short-term interest rates suggested Wall Street is now pricing in a Fed rate hike in June 2015, based on CME FedWatch, which tracks rate hike expectations using its Fed funds futures contracts. Before the jobs data was released, the Fed was seen raising rates in July of that year.
The employment report joins other upbeat data such as consumer spending and industrial production in suggesting that sputtering growth in the first quarter was an aberration, weighed down by an unusually cold and disruptive winter.
The Fed on Wednesday shrugged off the dismal first quarter performance. The U.S. central bank, which announced further reductions to the amount of money it is pumping into the economy through monthly bond purchases, said indications were that "growth in economic activity has picked up recently."
Economists expect second-quarter growth to top a 3 percent pace.
Household Survey Mixed
While details of the bigger survey of employers were robust, the smaller and volatile household survey from which the unemployment rate is calculated was mixed, with household employment falling slightly.
The labor force also declined by 806,000 people.
"That is gargantuan decline," said Tom Porcelli, an economist at RBC Capital Markets in New York.
The labor force participation rate, or the share of working-age Americans who are employed and unemployed but looking for a job, fell 0.4 percentage point to 62.8 percent. That was the lowest level since last December.
%VIRTUAL-article-sponsoredlinks%Some of the 1.35 million people who lost their longer-term unemployment benefits at the end of last December may have dropped out of the labor force last month.
But a broad measure of unemployment, which includes people who want to work but have stopped looking and those working only part time but who want more work, fell to a 20-year low of 12.3 percent in April. It was at 12.7 percent in March.
Employment gains in April were broad-based, with the private sector adding 273,000 jobs and government payrolls rising 15,000. Manufacturing employment increased 12,000 after rising by 7,000 in March.
Construction payrolls gained 32,000. That followed an increase of 17,000 jobs in March. The hiring trend could slow in the months ahead as residential construction loses some steam.
Average hourly earnings were flat in April. The length of the workweek held steady at 34.5 hours last month after bouncing back in March from its winter-depressed levels.
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The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.