Third straight surge in job rolls suggests a new Fed tightening.

WASHINGTON -- The Federal Reserve is likely to raise short-term interest rates again as early as today in the wake of Friday's employment report, which showed the labor market surging unexpectedly in April for the third straight month.

"They've got to be about ready to pull the trigger again," said Robert Brusca, chief economist of Nikko Securities Co. International.

Brusca's comment and similar ones from several other analysts came after the Labor Department reported that nonfarm jobs climbed 267,000 on a seasonally adjusted basis in April and would have been 70,000 higher had it not been for the Teamsters' strike.

The April gain exceeded expectations by a wide margin and followed a whopping 464,000 advance in March and a hearty 278,000 increase in February.

"I love this report and the Fed is going to hate it," said Nancy Kimelman, chief economist of Technical Data.

Kimelman and other analysts said there is now a very high probability the Federal Open Market Committee will raise both the federal funds rate and the discount rate either sometime before or during its next meeting, scheduled for May 17. They said a 50 basis point hike on the federal funds rate is not out of the question.

"This report was good, good, good across the board," said Robert Dederick, chief economist of Northern Trust Co. "The Fed has virtually free rein to do whether it wants."

The Fed has raised the federal funds rate -- the rate banks charge each other for overnight loans -- in quarter point increments to 3.7% from 3% since early February. The discount rate -- the rate the Fed charges banks for overnight loans -- has stood at 3% since July 1992. This rate, usually changed by half-point increments, is generally viewed as a symbolic statement of the Fed's stance on rates.

The Labor Department also reported that the unemployment rate dropped to 6.4% in April from 6.5% in March, rather than remaining at 6.5% as most economists had forecast.

Along with other recent positive economic news, Friday's report provides the strongest evidence to date that growth is likely to accelerate in the second quarter from the 2.6% rate seen in the first quarter. "The report shows businesses are finally confident enough about the sustainability of the expansion to hire large numbers of new workers," Dederick said.

Services added 146,000 new jobs to the economy in April, while retail employment expanded by 80,000 jobs, the government figures showed. Construction employment also surged 64,000, rebounding from severe winter weather in the first two months of the year, while manufacturing edged up 3,000.

"Now that we have bounced back from the slow start to the year's construction activity, underlying job growth appears to be running at about twice the average monthly rate that we saw in 1993," said Katharine Abraham, commissioner of the Bureau of Labor Statistics, in a statement released with the report.

Economists were unanimously encouraged by Friday's report. However, growth forecasts for the second quarter vary considerably because analysts have only one month's set of numbers. Dederick and Stuart Hoffman, chief economist of PNC Bank Corp., predict growth in the neighborhood of 4% in the second quarter. Meanwhile, other forecasts go as high as 6% and as low as 3%.

Working hours showed no change in April: total weekly hours were unchanged at 34.7, manufacturing hours were unchanged at 42.8 and overtime hours stayed at 4.8, according to the report. Analysts said it's no real surprise that hours did not advance because they are very high by historical standards and have been there for quite some time.

Since January, the employment rate has fallen to 6.4% from 6.7%.

The report revived debate about whether the economy is getting close to full employment, triggering an upturn in wages and salaries that would lift the inflation rate.

Analysts disagree as to how close 6.4% unemployment is to the theoretical line in the sand.

"We're damn close," Technical Data's Kimelman said. She noted that even though she is still optimistic about inflation, Friday's report did make her a little more wary of future inflation.

On the other hand, Joseph Ford, an economist with The WEFA Group, said 6.4% unemployment is still a few tenths of a points away from full employment, and inflation is likely to remain "tame" through the end of the year. "There is really no indication of a pickup in inflation," Ford said.

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