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U.S. Unemployment Falls to Lowest Level Since May 2008

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Payrolls rebounded in April following an even bigger setback a month earlier than previously estimated, a sign companies are confident the U.S. economy will reboot after stagnating early this year. The unemployment rate dropped to 5.4 percent.

The 223,000 net increase in employment followed an 85,000 gain in March that was the smallest since June 2012, figures from the Labor Department showed Friday in Washington. The jobless rate fell to the lowest since May 2008 as more Americans entered the labor force and found work. Average hourly earnings climbed less than forecast.

Construction and health care were among the industries that accelerated the pace of hiring last month as the economy emerged from temporary setbacks that included bad weather and a labor dispute at West Coast ports. Such job growth and steadily rising wages may keep the Federal Reserve on track to raise its benchmark interest rate later this year.

“The pace of employment is quite encouraging,” said Gregory Daco, head of U.S. macroeconomics at Oxford Economics USA Inc., whose payrolls forecast of 221,000 was among the closest in a Bloomberg survey. “Wage growth is accelerating, but it’s quite gradual, more gradual than we would expect in a market where the unemployment rate is 5.4 percent.”

Stock-index futures advanced and yields on Treasury securities fell after the report, with the contract on the Standard & Poor’s 500 Index expiring in June rising 0.7 percent to 2,099.3 at 8:40 a.m. in New York. The yield on the benchmark 10-year Treasury note dropped to 2.14 percent from 2.18 percent late on May 7.

Previous Months

The median forecast in a Bloomberg survey of 96 economists called for a 228,000 advance, with estimates ranging from gains of 175,000 to 327,000. March was revised from a previously reported 126,000 advance. Revisions to prior reports subtracted a total of 39,000 jobs from overall payrolls in the previous two months.

To calculate the data, the Labor Department surveys businesses for the pay period that includes the 12th of the month. The span between the agency’s April and March employment surveys was five weeks, rather than the typical four.

The participation rate, which indicates the share of working-age people who are employed or looking for work, increased to 62.8 percent from 62.7 percent in March, which matched the lowest since 1978.

Hourly Earnings

Wage growth remains limited, with average hourly earnings rising 0.1 percent in April after a revised 0.2 percent gain that was weaker than initially reported. Compared with a year earlier, hourly pay was up 2.2 percent last month, less than the Bloomberg median estimate of 2.3 percent.

The average work week for all employees held at 34.5 hours.

Construction companies took on 45,000 workers in April, the biggest gain since January 2014. Employment in health services increased 55,600 in April, the strongest increase in five months.

Michele Natale, 54, a licensed practical nurse who’s been looking for steady employment for a year, said she’s relieved to be starting a new, full-time job next week with Blue Cross Blue Shield. The work couldn’t come at a better time, as there’s currently “not enough money to pay rent, no money for food, not money for gas — it’s been horrible,” she said.

When a former manager helped her find the job, “I was elated, because the benefits are good, and the money is phenomenal for down here,” said Natale, who lives in Flagler Beach, Florida. “I just feel very fortunate, especially because of my age.”

Oil Industry

The slowdown in employment tied to cheaper oil prices persisted in April, the Labor Department’s report showed. The mining industry, which includes oil extraction and services, lost 15,000 jobs, the most since May 2009.

Job growth in leisure and hospitality employment, which climbed by 17,000 last month, was restrained by a 7,100 decrease in payrolls at hotels. Employment at restaurants rose 26,000.

Fed Chair Janet Yellen and her colleagues will use the data to help them parse the strength of the economy as they consider raising interest rates for the first time since 2006. Officials, who dropped a promise in March to be patient on raising rates, say they can act at any policy meeting, beginning with their gathering on June 16-17. Most expect them to move later this year.

Fed’s Lockhart

“The report comes at a time in which I, for one, at least am very tuned in to what signals the economy is throwing off,” Federal Reserve Bank of Atlanta President Dennis Lockhart told reporters in Baton Rouge, Louisiana, on May 6. “I view it as a very important one to tell us about the growth momentum in the economy.”

The economy ground to a near-halt in the first quarter, weighed down by cheap oil, a stronger dollar, labor-related delays at West Coast ports and rough winter weather in parts of the country. Fed policy makers have said some of the headwinds holding back the U.S. will probably fade and give way to “moderate” growth.

Gross domestic product rose at a 0.2 percent annualized rate after advancing 2.2 percent in the prior quarter, Commerce Department data showed last month. Household spending, the biggest part of the economy, advanced at a 1.9 percent pace.

Comcast Hiring

Companies including Comcast Corp. are creating jobs to capture more of those consumer dollars. The biggest U.S. cable-TV provider will create more than 5,500 jobs during the next few years to improve consumer service, with three new customer-support centers set up in New Mexico, Washington and Arizona, the company said in a May 5 statement.

While more jobs and rising wages will be a boost to consumers, profits will probably suffer if productivity fails to pick up. Companies have been hesitant to invest in new equipment, and rising labor costs without offsetting increases in efficiency can hurt earnings.