Spike in Jobs Numbers Brightens Weekend
LIANE HANSEN, host:
Following a spate of disappointing economic reports in recent months and the continuing high price of oil, the US economy caught a ray of sunshine on Friday. The Labor Department reported an unexpected increase in the number of jobs. NPR's John Ydstie covers the economy and joins us to talk about whether the sunny weather is here to stay.
Welcome back, John.
JOHN YDSTIE reporting:
It's nice to be here, Liane.
HANSEN: So tell us exactly how important this report is that the economy added--What?--274,000 jobs last month.
YDSTIE: That's right. You know, the employment report is really the most important monthly report that comes out about the economy. And I think what this one tells us is that employers are much more confident in the economy than economists and investors have been over the past month or so. Among them, there was a lot of talk of a soft patch because of uncertainty about oil prices and concerns that those high oil prices were hurting consumers. And, in fact, consumer confidence measures had declined recently. Manufacturing activity was also trending down and there was even speculation that the Federal Reserve, which just raised short-term interest rates earlier this week, might decide to pause to give the economy a little breathing room. That's not likely now. Most analysts say this strong employment report for April, along with upward adjustments for the previous months, mean that the US economy continues to have momentum. When businesses are confident enough to hire workers in these numbers, 274,000, it's a pretty positive sign.
HANSEN: So why didn't the unemployment rate fall then if the job growth was so strong?
YDSTIE: Well, there's both positive and negative news there. The positive part is that prospects of getting a job appear to have risen enough that many people who had quit looking for work have re-entered the labor force; around 600,000 new entrants in April. The negative view, though, is that there still aren't enough jobs for all those folks. So even though we added all those jobs in April, it wasn't enough to bring the unemployment rate down.
HANSEN: Now a little bit about the continuing high price of oil. Do you think that might eventually stall the economy?
YDSTIE: Well, it's not like it used to be back in the battle of the 1970s which both of us remember when a run-up in oil prices really hurt the economy. The US economy is much more energy efficient now. There seem to be adequate inventories of oil, but there's still a big fear factor in oil prices, a fear of disruption because of the Iraq War, fear of disruption because of the backsliding in Russian politics. So I think oil is likely to remain a drag on economic growth.
HANSEN: Are there any other challenges out there?
YDSTIE: You know, the big challenge I think which is a more long-term challenge is--simply speaking, it's trade deficit. The trade deficit is not rising at a rapid rate and on an annual basis running at about three-quarters of a trillion dollars a year, and what it means is that Americans are consuming much more than they produce and borrowing from other countries to do that. And how that borrowing gets unwound in a way that doesn't rattle the financial markets and disrupt the world economy is really the big challenge that the US economy faces.
HANSEN: NPR's economics correspondent John Ydstie.
John, thanks a lot.
YDSTIE: You're welcome, Liane.
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