Unemployment drops to 8.1%, but April numbers fall far below estimates as government cuts continue to hold back growth
The unemployment rate fell, in part because people had stopped looking for work
The recovery in the jobs market has stalled for a second month as the US added just 115,000 new positions in April, increasing the likelihood that Barack Obama will face a tough reelection battle over his handling of the economy.
US stock markets dipped marginally lower after the numbers were released. A survey of analysts polled by MarketWatch had forecast a 163,000 rise in jobs last month.
The unemployment rate fell to 8.1%, but this came as the percentage of the population in the labour force declined, in part because people had stopped looking for work.
The figures follow March's disappointing report. Hiring slowed sharply in March with the government initially estimating that just 120,000 jobs were added, half the number the US added in February. The latest figures from the Labour Department have revised March's numbers up to 154,000 but are unlikely to dampen fears that the US recovery is stalling.
In a statement released by the White House, Alan Krueger, chairman of the council of economic advisers, said: "Today's employment report provides further evidence that the economy is continuing to heal from the worst economic downturn since the Great Depression, but much more remains to be done to repair the damage caused by the financial crisis and the deep recession."
Cautioning against reading too much into one monthly report as the figures can be volatile, he added: "Despite adverse shocks that have created headwinds for economic growth the economy has added private sector jobs for 26 straight months, for a total of 4.25 million payroll jobs over that period."
But the latest numbers will not help the White House allay voters' fears that the recovery is stalling. Recent US history suggests a president will find it hard to win with unemployment above 7% and the chances of Obama seeing unemployment drop to that level are remote.
Unless there is a major international incident, such as an attack on Iran or a surprise development on the domestic front, unemployment seems almost certain to be the dominant issue of the election campaign.
Mitt Romney, the presumptive Republican nominee to take on Obama in November, described the April figures as terrible. "We should be seeing numbers in the 500,000 jobs created per month. This is way, way off from what should happen in a normal recovery," he told Fox News.
"I think the American people know that their lives are not better than they were three and a half years ago," Romnney said. "They know that the incomes in this country have not risen, they've fallen. They know the president in his first months in office said that he would hold unemployment below 8% and we've had 38 straight months of unemployment above 8%."
Earlier in the day, Romney had used an op-ed in the Cleveland Plain Dealer to attack the president's jobs record. Presented as a letter to Obama who is to formally launch his election campaign in Ohio on Saturday, Romney said: "Dear Mr. President: Welcome to Ohio. I have a simple question for you: Where are the jobs?"
John Boehner, the House Speaker, issued a statement using the same refrain within minutes of the figures being released. "Where are the jobs? Families are stuck," he said. "The wages of those fortunate enough to have a job are stagnant, but they're paying more for everything from gasoline to groceries.
"And those looking for work can't find it because Obamacare, our spending-driven debt, and the threat of tax hikes are making it harder for small businesses to hire. Nearly half of college graduates are unemployed or underemployed in president Obama's economy."
Analysts were divided in their assessment too.
"The drop in the unemployment rate to 8.1% is deceptive to say the least, as this was driven by a drop in the participation rate to 63.6% from 63.8% previously. This is down from 64.2% a year ago. This has been driven by a stunning 2,693,000 people leaving the labour force in 12 months," said David Semmens, senior US economist at Standard Chartered.
Jack Ablin, chief investment officer of Harris Private Bank, explained the slight dip in the markets as investors looking at the strong figures winter figures as unusual and the latest numbers as closer to the real picture of the jobs' market recovery. "The winter was stronger than we expected in part because of the mild weather," he said.
But Betsey Stevenson, assistant professor of business and and public policy at the University of Pennsylvania's Wharton business school, was more upbeat. "We lost a lot of jobs in this recession, so we aren't anywhere near adding all the jobs back," she said. "But we are clearly adding jobs and we've been adding them fast enough to bring down the unemployment rate. This month is obviously disappointing, but as we saw with last month's number, we have to keep our eye on the long-run trends and, of course, pay attention to revisions."
The figures will also put pressure on Federal Reserve chairman Ben Bernanke to act and increase the likelihood of a third massive round of bond buying in an aim to boost the economy – a tactic known as quantitative easing. Last week Bernanke said: "If unemployment looks like it's no longer making progress, that will be an important consideration in thinking about policy options."
The two disappointing months followed three months of 200,000 plus jobs growth in December, January and February. Even at 200,000 a month, it would take until 2020 for the US to add back the 10m jobs it needs to return to employment levels last seen before the recession.
Government cuts continued to hold back jobs growth. Governments cut payrolls by 15,000 in April. Professional and business services rose by 62,000 jobs. Manufacturers added 16,000.
The number of long-term unemployed (those jobless for 27 weeks and over) was little changed at 5.1 million in April.
Earlier this week a survey by payroll processor Automatic Data Processing (ADP) also suggested the recovery in the labour market had weakened.
Companies hired 119,000 in April after a 201,000 gain a month earlier, according to the monthly report from payroll giant. Economists had expected companies to add closer to 183,000 for the month.