MELISSA BLOCK, HOST:
From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block. Wall Street got a lift today after the government issued a stronger than expected jobs report for April. Both the Dow and the S&P 500 indexes hit new highs. As NPR's John Ydstie reports, the rally was fueled by relief that the economy is showing signs of resilience in the face of major government belt-tightening.
JOHN YDSTIE, BYLINE: Expectations for the April jobs report were very low. A private firm's estimate earlier this week was disappointing and that followed March numbers that originally were about half of what was predicted. So analysts and investors braced for more disappointment this morning and another spring swoon in the nation's economy. But the concern turned to relief when the government reported that 165,000 net new jobs were added to the economy in April and the unemployment rate dropped to 7.5 percent.
That's down from a peak of 10 percent back in 2009, during the recession. Nariman Behravesh, chief economist at IHS, says the April report was clearly positive.
NARIMAN BEHRAVESH: And in particular, it looks like the private sector, so far, is still shrugging off the sequester, which is very good news. We need a strong private sector to be able to withstand the kind of cuts we're seeing at the federal level.
YDSTIE: Private employers added 176,000 new jobs while the government sector shed 11,000. Another boost came from positive revisions for February and March. Those revisions boosted employment by 114,000. Behravesh says when you step back and look at the past six months, there's been no slowdown in the pace of job creation.
BEHRAVESH: Jobs growth is averaging somewhere just over 200,000 a month, which is pretty good.
YDSTIE: That said, Behravesh does think the across-the-board budget cuts in the sequester will begin to bite in the next couple of months and reduce growth temporarily. He says the small decline in the number of hours in the average work week in today's report may be a reflection of the government furloughs.
Ian Shepherdson of Pantheon Macroeconomics is a big more pessimistic. He thinks the stock market rally today came because investors expected to be disappointed.
IAN SHEPHERDSON: So then, when the number comes in above those beaten down expectations, the market gets excited. But I got to say, when you got a 165 payroll number in an economy with an unemployment rate that's still far too high, I don't really think that's anything to get excited about.
YDSTIE: Shepherdson says he's concerned to see construction losing jobs in April, despite the recovery in housing. He attributes it to a slowdown in government infrastructure projects and a decline in private non-housing construction. Other recent data is also consistent with the economy slowing a bit since the middle of the winter, he says.
SHEPHERDSON: But very little of it suggests that things have actually rolled over, that things have taken a really serious turn, but the danger is, of course, that we're not finished yet absorbing the fiscal tightening and so things could get worse before they get better.
YDSTIE: And Shepherdson says with growth currently running just above 2 percent, there's not a big margin for error. If the economy can safely absorb the government's budget tightening this year, both Shepherdson and Behravesh think 2014 could look much better for U.S. growth.
John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.