US unemployment drops to lowest level in half a century

MORE jobs were created in the US last month than had been forecast by economists, which resulted in unemployment falling to 3.6pc, its lowest level since December 1969.

April also marked a record 103 consecutive months in which jobs were added to the economy.

The sign of economic strength may reverse expectations that the US Federal Reserve could turn dovish and cut interest rates this year.

The number of new jobs in the country rose by 263,000 last month, a figure that President Donald Trump will likely welcome as he gears up for his re-election campaign.

Wage growth also climbed to 3.2pc last month, ensuring that April was the ninth consecutive month in which an increase of more than 3pc was posted.

Job growth was particularly strong in the services sector and construction with 76,000 and 33,000 new roles respectively, while manufacturing was much weaker with just 4,000 more roles added.

While the official data indicated an improvement on the less robust start to the year, there were also signs of softening elsewhere.

The number of hours worked by each employee fell from 34.5 to 34.4 while household surveys also suggested a weaker labour market. The participation rate fell by 0.2 percentage points to 62.8pc.

Overall this meant the US labour market was “not quite as strong” as the headline figure implied, Michael Pearce of Capital Economics said. However, the “healthy” numbers should quell near-term recession fears, according to Richard Flynn of Charles Schwab, who also warned of an unsustainable “disconnect” between economic data and stock markets.

Wall Street has clawed back last year’s losses, but the swing may have been “too far, too fast”, he said.

“When the Fed first began tightening, there was a sharp positive correlation between economic surprises and the stock market, but now that trend has completely reversed,” Mr Flynn said.

“Stocks are now ‘cheering’ weaker economic news – likely because of what it suggests for monetary policy. Frankly, we’re not sure that negative correlation can last,” he added.

Higher interest rates are often used to act as a brake on economic growth, to manage price rises as demand outstrips supply – historically, a trigger for recessions.