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Economic Watch: Unemployment Lowest in More Than Five Years; Factory Shipments, Auto Sales Up

May 2, 2014

By Evan Lockridge

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UPDATED -- Unemployment in the U.S. fell several notches in April, hitting its lowest level since September 2008.

Numbers released Friday by the U.S. Labor Department show 288,000 jobs were added, the most since January 2012, with the unemployment rate falling to 6.3% from 6.7% in March.

The department also revised upward job gains in March from 192,000 to 203,000 and February from 197,000 to 222.000.

6,800 of the overall job gains in April were in the for-hire trucking business, while the wider transportation and warehousing sector gained 11,300 jobs.

Other sectors also saw impressive jobs gains with 32,000 in construction, 12,000 in manufacturing, 35,000 in retail and 75,000 in professional and business services.

The report follows a separate one from the payroll service ADP showing 220,000 private sector jobs were added in April.

Another encouraging sign is the number of part-time workers who prefer to have full-time jobs, along with those who are unemployed but are looking for work, fell from 12.7% to 12.3%. On the negative side average hourly earnings for those employed were unchanged in April from March, but are up 1.9% over the past year.

“An impressive headline report suggesting noticeable momentum in the labor market after months of weakness at the start of the year. But while the headline reading appears to be fantastic, reinstating the pre-winter weather momentum of October and November, the inorganic decline in the unemployment rate suggests there are still significant headwinds facing the U.S. labor market,” said Lindsey Piegza, chief economist with the investment firm Sterne Agee. “This juxtaposition of strength and weakness within the same report is the very reason the Federal Reserve opted to move away from a quantitative target on the unemployment rate to a more qualitative, broad-based assessment of labor market conditions.”

She also pointed out this recent decline in unemployment was not the result of millions of Americans finding employment, noting household employment fell by 73,000 in April.

“The decline was the result of hundreds of thousands of Americans dropping out of the labor force. The labor force fell by 806,000 in April, the largest monthly decline since October 2013, pulling down the participation rate from 63.2% to 62.8%,” Piegza said. “After three months of improvement, the participation rate has fallen back down to December’s level, the lowest reading in more than three decades.”

Factory Shipments and Orders

A separate report from the U.S. Commerce Department shows gains for factory shipments and new orders in March.

Shipments increased 0.3% from the previous month while new orders gained 1.5%. The level of factory shipments is the highest on record, going back to 1992, and follows a 0.9% increase in February.

New orders, excluding transportation, increased 0.6%, while new orders of manufactured durable goods picked up an upwardly revised 2.9%, following a 2.3% increase in February. New orders for transportation equipment led the hike, picking up 4%.

Orders for core capital goods, an indicator for future business investment, gained 3.5% in March, after a 0.9% decline in February, the biggest increase since January 2013.

Shipments of manufactured durable goods gained an upwardly revised 1.2% following a 1% February increase. It was led by transportation equipment shipments, increasing 1.5%.

Auto Sales

U.S. auto sales of revving higher and are poised to hit its highest level in several years.

Estimates are that nearly 1.4 million cars, light trucks and SUVs were sold in April, 8% higher than the same time a year ago, according to published reports.

This puts the annual rate at 16 million, down slightly from March’s pace, but is the best showing since March 2007. Last year, consumers purchased 15.6 million cars and related vehicles. Growth in auto sales got off to a poor start the first couple of months of the year, but finally picked up in late March.

General Motors saw a 7% increase in sales in April compared to the same time in 2013, while Fiat Chrysler saw a 14% gain. Ford slipped 1%.

Toyota and Nissan reported gains of 13% and 18%, respectively, while Honda saw just a 1% increase. Others in positive territory for the month include Daimler, Hyundai, Audi and BMW while Volkswagen fell 8.4%. Subaru had the biggest upturn, adding 22%.

Update adds factory orders and shipments along with car sales.

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