Surprisingly Strong Job Growth

May 2, 2014

The labor market remains surprisingly and resiliently strong, as evidenced by the gain of 288,000 new jobs created in April.  The gain this month was aided by some catch up - hiring that perhaps would have happened earlier if not for the widespread inclement weather.  But that is only one part of the story.  Indeed, the more important part is that the economy has been gathering strength for some time.  The signals from the surveys of purchasing managers and The Conference Board Leading Economic Index have been pointing to some acceleration for months.  Weather, sequestration, a significant buildup of inventory and other factors have helped bottle up some of this strength.  Now, it would appear, the absence of these factors is finally allowing the economy's underlying strength to come to the surface.  The result is not just a relatively strong gain in jobs in April but probably more of the same in May and June and perhaps right through the summer.  And more jobs means more pay checks, lifting sentiment and spurring more spending.  The business response will be to lift investment in equipment.  With consumption and investment picking up some steam, more new jobs will keep opening up.  In fact, it could be enough to send the unemployment rate below 6 percent late in the second half of the year.  Another outcome: discouraged job seekers going back into the labor market.  And that is an even better marker for how much improvement is in economic conditions and prospects.

Source: The Conference Board