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The job market isn't poised to reverse course just yet, even though the loss of 20,000 jobs last month comes as somewhat of a surprise. Expectations were for a grimmer number following the loss of 81,000 jobs in March.
Despite the prospect of more declines in the next few months, jobs could show a net gain in 2008, probably a modest 100,000, if the economy perks up in the second half as we expect. Last year, companies added 1.13 million jobs.
The Labor Department today also reported that the unemployment rate edged down to 5% from 5.1% in March. The stability is good, but it hides some stress: The number of persons working part time because their hours were cut or because they couldn't find full-time work increased by 306,000. At 5.2 million, their ranks are up 849,000 over the past 12 months.
Job growth is likely the most important element in consumer spending. The bleak employment picture explains then why consumer expenditures in the first quarter rose just 1% as the economy barely expanded, by 0.6%. Tax rebate checks starting to be sent now will help offset some of the drag from job losses and should be sufficient to keep the economy expanding in the summer and ultimately provide enough of a boost to reverse the decline in jobs.
That scenario is what officials at the Federal Reserve are counting on. After a quarter point rate cut Wednesday, the central bank signaled that it hopes it is finished with interest rate reductions for fear they would fuel inflationary pressures worsened by soaring food and energy prices.
One bright spot for policymakers is a tame increase in wages. Average hourly earnings rose 0.1% for April, putting the 12-month increase at 3.4%. Officials watch this number as one yardstick in assessing whether rising prices of goods and services are seeping into wages.
Meanwhile, job losses continue to mount in manufacturing and construction, which shed 46,000 and 61,000 jobs, respectively. Elsewhere, retail lost jobs as did temp services. There were gains in health care and professional services, especially in computer systems design, accounting and bookkeeping.
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