This push-and-pull dynamic was evident in data released Friday by the Labor Department, as private employers added 176,000 people to their payrolls even as the public sector shed an additional 11,000 workers.
The latest figures painted a somewhat brighter picture of the overall economy than had been expected as the government sharply revised upward its estimate for job creation in the previous two months. Those revisions concluded that the economy generated a robust 332,000 jobs in February, not the 268,000 originally reported, and 138,000 in March, up from 88,000.
The news sent the stock market soaring to new highs, with major stock market indexes closing up 1 percent for the day.
Still, at 7.5 percent, a slight drop from last month’s 7.6 percent, the jobless rate remains far higher than it typically would be this far into a recovery. It is also a full percentage point above the level the Federal Reserve has said it wants to see before it will consider raising interest rates from their current levels near zero.
As a result, most experts expect the economy to continue to be buffeted by countervailing factors in the months ahead, with business activity and the Fed providing a healthy measure of support for growth even as fiscal austerity in Washington makes a substantial drop in the unemployment rate unlikely.
“The drag from the government sector is quite substantial,” said Gregory Daco, senior principal economist at IHS Global Insight. “Given the fiscal headwinds, the private sector is doing O.K.”
Despite repeated fears of a double-dip recession, an economy that has endured a spring swoon for three consecutive years and other potential perils, the country’s rate of job creation has been remarkably steady, if subdued. Over the last three years, the economy has added an average of 162,000 jobs a month, within a hairbreadth of April’s pace, at least as initially estimated, of 165,000 new jobs.
But experts have been warning that the economy and job creation are likely to slow in the second quarter, largely as a result of fiscal tightening in Washington. Payroll taxes increased in January, and the effect of across-the-board spending cuts mandated by Congress is expected to be felt more broadly in the months ahead.
While the private sector has been on the upswing since last summer, cutbacks in government employment continue to prevent a stronger acceleration in the economy, economists said.
“If it weren’t for the government, the economy would be stronger,” said Mr. Daco, citing the spending cuts hitting now, as well as the higher Social Security deductions for all workers and increased income taxes for top earners that began in January.
On the other hand, he said, “If the Fed hadn’t loosened monetary policy, we’d be seeing weaker growth. Both sides are generating opposing forces.”
Even though job growth now looks better, continued strains in the economy and data this week showing inflation over the last 12 months running at a low 1 percent rate suggest that the Fed is not likely to slow its $85 billion in monthly bond purchases intended to stimulate the economy for at least the next few months. On Wednesday, the Fed said it was “prepared to increase or reduce the pace of its purchases,” depending on the outlook for the labor market and inflation.
The White House was quick to highlight Friday’s report, even as it warned of the potential dangers from the fiscal squeeze.
“While more work remains to be done, today’s employment report provides further evidence that the U.S. economy is continuing to recover from the worst downturn since the Great Depression,” Alan Krueger, chairman of President Obama’s Council of Economic Advisers, said in a statement. Mr. Krueger urged Congress to replace automatic budget cuts with a more balanced approach. “Now is not the time for Washington to impose self-inflicted wounds on the economy,” he said.
Article source: http://www.nytimes.com/2013/05/04/business/economy/us-adds-165000-jobs-in-april.html?partner=rss&emc=rss
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