The US economy looks better placed to withstand a slowdown projected for the second quarter as the labour market keeps making progress. Employers took on an additional 165,000 workers in April, more than forecast, according to Labour Department data. Revisions showed 114,000 more workers were hired in February and March than previously estimated. The jobless rate fell to a four-year low of 7.5% last month.
Payrolls are now expanding at a faster pace this year than in 2012, which will help the US economy emerge from a softer period of growth projected for the second quarter. Stocks rallied after the report, sending the Dow Jones Industrial Average briefly above 15,000 for the first time.
Other reports this week showed auto sales and manufacturing cooled in April, indicating the expansion will slacken as consumers are pinched by higher taxes and factories rein in stockpiles and production. Nonetheless, the pickup in hiring means American companies are confident the world’s largest economy will overcome across-the-board federal budget cuts to rebound in the second half.
Economists project gross domestic product will cool to a 1.5% annualised pace for the period from April through June, after advancing at a rate of 2.5% in the previous three months, according to a Bloomberg survey from April 5th to April 9th.
The jobs report removed some of the worst concerns from the economic outlook. The Labour Department revised the March employment gain up to 138,000 from the initially estimated 88,000. February’s advance was pushed up to 332,000 from the 268,000 prior estimate, making it the strongest month for employment since November 2005, excluding the census-related temporary boost in government hiring in mid 2010.
The Bank of England will maintain its target for asset purchases next week after surveys indicated the recovery is gaining momentum, a survey of economists shows. The nine-member Monetary Policy Committee led by governor Mervyn King will keep the target for quantitative easing (QE) at £375bil (US$582bil), according to all but one of 44 economists in the Bloomberg News poll.
The MPC will also keep its benchmark interest rate at a record-low 0.5%, another survey shows. Services, the largest part of the economy, unexpectedly strengthened in April as new business rose, while manufacturing and construction shrank less than forecast, Markit Economics said this week.
Those reports followed data on April 25th showing that gross domestic product increased 0.3% in the first quarter, averting a third recession since 2008. “The encouraging outturn for the services index is
a hopeful sign that the recovery is now genuinely under way,” said Nida Ali, an economist at the Ernst & Young Item Club in London.
“Given the relatively strong run of economic indicators over the past few weeks, the chances of any additional QE being authorised this month now look slim.” The MPC will announce its decisions at noon on May 9 following its two-day meeting.
Policy makers will have new projections for economic growth and inflation, which they will publish in the quarterly Inflation Report on May 15. The MPC has split in recent months on the need for more QE, with King and two others pushing for a £25bil increase. While Chancellor of the Exchequer George Osborne gave policy makers more flexibility in March to support the recovery, the improving economic data may weaken the minority’s case.
The purchasing managers index for services rose to 52.9 in April, the highest in eight months, from 52.4 in March, Markit and the Chartered Institute of Purchasing and Supply said yesterday in London. Readings above 50 indicate expansion. The construction index increased to 49.4 from 47.2, while the manufacturing gauge advanced to 49.8 from 48.6.
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