Unemployment in the U.S. hit a post Great Recession landmark, according to figures released Friday, while a separate report showed increased factory orders but declining capital investment for new factory equipment.

The U.S. economy added 164,000 jobs in April, according to the Labor Department, pushing the unemployment rate down to 3.9%, its lowest level since 2000. The rate had been at 4.1% for the past six months.

Overall, the job gains occurred in professional and business services, manufacturing, health care, and mining categories. In contrast, the for-hire trucking industry lost 5,500 jobs in April while the wider transportation and warehousing sector reported a net gain of just 400.

Despite the tight job market, the Labor Department reported wages in April barely increased, moving just 0.1% higher than the month before. Over the past year it is up 2.6% for the third month in a row, just barely higher than the annual inflation rate of 2.4% recorded by the Commerce Department in March.

“Though the average increase over the two months is down from the 186,000 monthly average achieved over the previous twelve months, the slowing is likely more an indication of increasing difficulty securing new hires with labor markets operating at capacity rather than any weakening in demand for workers,” said Paul Ferley, assistant chief economist at RBC Economic Research. “The larger-than-expected reported drop in the unemployment rate…provides additional evidence of tightening labor markets.”

He said tightening labor markets argue that the current highly simulative monetary conditions of lower interest rates by the Federal Reserve are no longer warranted and the jobs report reinforces RBC’s forecast that the fed funds rate range, currently at 1.50% to 1.75%, will continue to be hiked by 25 basis points (0.25%) each quarter through next year, finishing 2019 at 3.25% to 3.50%.

Last Wednesday, the Federal Reserve met but opted to keep interest rates unchanged, though it still has a positive view of the economy, as analysts expect the central bank to hike rates when it meets in June.

Also, the jobs report followed one from a couple of days earlier in which payroll processor ADP reported there were 204,000 nonfarm private sector jobs added in April, its lowest level since last November-- but the sixth month in a row it was above the 200,000 level. The March total of jobs added was revised down from 241,000 to 228,000.

“Despite rising trade tensions, more volatile financial markets, and poor weather, businesses are adding a robust more than 200,000 jobs per month. At this pace, unemployment will soon be in the 'threes,' which is rarified and risky territory, as the economy threatens to overheat,” said Mark Zandi, chief economist of Moody’s Analytics.

Factory Orders Up but Business Investment Reverses Course

Meantime, a report from Thursday showed increased new factory orders in March, as they rose 1.6% from the month before, the same level it increased during February, according to the Commerce Department.

And while shipments of factory-made goods increased for the 15th time out of the past 16 months, posting a 0.4% March rise from February, an indicator of business investment fell.

Orders for nondefense capital goods minus aircraft fell a revised 0.4% during March, more than the originally reported 0.1% drop. Also, shipments of these so called core-capital goods fell 0.8% in March, downwardly revised from a first reported 0.7% decline, and following a 1.2% increase in February.

“Factory orders have climbed in seven of the past eight months, and equipment spending, as reported in the gross domestic product report, has been supportive of topline growth in each of the past six quarters,” said Tim Quinlan, senior economist at Wells Fargo Securities. “But the modest softening in forward-looking measures like the orders components of manufacturing surveys and now the outright declines in core capital goods spending suggest limited upside to the outlook for capital spending at this late stage of the economic cycle.”

He noted  that a few days earlier, the monthly ISM survey about manufacturing showed its measure of new factory orders slipped but still remained high. However, he pointed out, the recent cycle high hit last December, while showing the fastest pace of new orders since January 2004, did not translate into a meaningful or sustained surge in actual business spending.

“In our view, there is scope for equipment spending to remain supportive of growth in the coming quarters, but the fastest quarterly growth rates for capital spending are already behind us,” said Quinlan.

About the author
Evan Lockridge

Evan Lockridge

Former Business Contributing Editor

Trucking journalist since 1990, in the news business since early ‘80s.

View Bio