April U.S. payrolls surprise hugely to the upside

Written by Reuters | Updated: May 3 2014, 02:07am hrs
U.S. job growth increased at its fastest pace in more than two years in April and the unemployment rate dived to a 5-1/2 year low of 6.3 percent, suggesting a sharp rebound in economic activity early in the second quarter.

STORY:

TABLE: KEY POINTS:

* Nonfarm payrolls surged 288,000 last month

* Private paryolls rose 273,000

* March and February figures both revised up

* Drop in the unemployment rate was largest since December 2010, matching the largest since 1983

COMMENTS:

RUSSELL PRICE, SENIOR ECONOMIST, AMERIPRISE FINANCIAL, TROY, MICHIGAN

"It's very encouraging for the overall pace of the economy looking forward. It shows that the negative reading on GDP is something to be ignored. Throughout this summer the economy will likely continue to gain traction, and we're likely to see GDP numbers improve significantly up to the mid-3s, for the next two quarters at least.

"You combine that with the upside adjustments to March and February and it shows that the economy really has strong underlying fundamentals supporting its growth. Temporary headwinds such as the bad weather can be certainly managed.

"The big drop in the unemployment rate may cause some concerns in consideration of what the Fed may do, but I still think that we're looking at a second quarter of 2015 likelihood for the first consideration for the hike in the Fed Funds rate. The ancillary data just says that even though the employment rate is down, the labor market in general still has a good amount of slack."

SHAUN OSBORNE, CURRENCY STRATEGIST AT TD SECURITIES IN TORONTO

"These are pretty good headline numbers, though a bit softer in details. Household participation rate was a little low. But overall these are pretty good numbers. People will take it as support along with the housing numbers that the U.S. economy is back on track. This should set up the dollar for gains for the rest of today's session."

GUS FAUCHER, SENIOR ECONOMIST, PNC FINANCIAL SERVICES, PITTSBURGH

"We may be seeing an acceleration in job growth. It's sustainable to have a 200,000-plus job growth over the next 6 to 9 months. The drop in 800,000 in labor participation is concerning. I don't think that's a permanent event. We will see the workforce expand. Average workweek is at its maximum so employers have to add more people. This is what the Fed wants to see. They will continue to slow their asset purchases, but this isn't going to force the Fed to raise interest rates earlier."

TOM PORCELLI, CHIEF US ECONOMIST, RBC CAPITAL MARKETS, NEW YORK

"It's a flatout good report. All of the metrics that you want to see improve, did. The one thing I would be careful with though is the decline in the unemployment rate, the decline in the unemployment rate was a function of the labor force falling by 806,000, that is gargantuan decline. I would caution against reading too much into the improvement in the unemployment rate."

"I think that maintaining 280,000 jobs given the current backup seems like a stretch, to say the least, but I do think you're in a 200,000 job growth trajectory and at the end of the day that is still enough to grow consumption at about a 2.5 percent pace, and that overall is an extremely positive outcome."

ADAM SARHAN, CHIEF EXECUTIVE, SARHAN CAPITAL, NEW YORK

"The headline number handily beat expectations, which bodes well for the whole weather theme we saw throughout the first quarter. This is good on two fronts: an economic front, as it obviously bodes well for the economy, and it also bodes well for the Fed's game plan. The Fed has been outlining projections for stronger growth, led by jobs, and now 6.3 percent unemployment is below the Fed's 6.5 percent target. As long as we continue in this direction, it will relieve pressure on the Fed.

"We'll move higher on this, but we had a big move this week. We're at resistance right now, and it may take a little bit of time to break above that. Once we digest this data and see if its a one-off, then we'll move higher." MARKET REACTION:

STOCKS: Index futures surge BONDS: Treasury yields rise FOREX: Dollar index rises, greenback stronger against both euro and yen