WASHINGTON - The unemployment rate fell to a 30-year low of 3.9% in April, adding pressure on Federal Reserve policymakers to raise interest rates.
The unemployment rate fell to its lowest since January 1970 from 4.1% in March, as the record economic expansion kept pulling in workers and boosted employee earnings, the Labor Department said Friday. Businesses added 340,000 jobs during April, led by the biggest jump at retail establishments such as restaurants and grocery stores in 12 years, after a gain of 458,000 jobs a month earlier.
Average hourly earnings rose 0.4% after a 0.3% March rise.
Stocks rose and Treasury securities fell after the report, which heightened concerns Federal Reserve policymakers may raise the overnight bank lending rate by a half percentage point to slow the economy and keep inflation from accelerating.
"This report has to give the Fed the willies," said Scott Brown, an economist at Raymond James & Associates in St. Petersburg, Fla. "The numbers are too strong for the Fed's liking, and it's a clear sign that growth is beyond a sustainable pace."
Central bankers meet in less than two weeks, and analysts are unanimous that they will raise interest rates for a sixth time since June. If the increase is a half point, that would bring the overnight bank rate to 6.5%, the highest in more than nine years.
Labor demand has been so strong it has hindered the record economic expansion, now in its 10th year, companies have told the Fed. Lack of workers "continued to hamper overall economic growth," the Fed said in its latest regional economic survey, released last week. In addition, "there were more frequent reports of intensifying wage pressures as shortages of workers persisted in all Districts," the report said.
That has Fed officials, who meet May 16 for their third policy meeting this year, increasingly concerned. "The balance of aggregate demand and sustainable supply today and the distinct possibility that labor and product markets will tighten further suggest an unacceptable risk of overheating and, therefore, higher inflation in the future," Fed Governor Laurence Meyer said during a speech last month in Toronto.