US unemployment rate falls below 4%; not all is well, says report

A development that would leave American President Donald Trump elated -- the unemployment rate in the US has fallen to 3.9 per cent in April, the lowest since 2000.

However, although the below-4-percent unemployment rate sounded great for the economy, reports in the US media also said that not everything would be great because of this.

The USA Today said in a report that the Labor Department's announcement on Friday, May 4, confirmed that the US's unemployment scenario bettered in April from what it was in March (4.1 per cent) and also there was a job gain of 164,000, yet the news was "actually a mixed bag".

The USA Today article said less unemployment means more jobs and fewer workers and this opens more opportunities, even for the less educated, disabled and ex-offenders but at the same time, it meant a slow economic growth because if the number of workers is less, the businesses can not satisfy the customers' demands which means less delivery of products and services which in turn results in less hiring of workers.

Low unemployment also means higher wages as the employers are under less economic pressure and it means they can hike wages sharply to retain employees. But according to USA Today, another disadvantage of low unemployment means a smaller workforce.

It said in April, joblessness reduced because there were 236,000 people less in the workforce that included Americans seeking jobs. "That's not a happy development because a healthy labour market should draw in Americans on the sidelines. It would be more encouraging if the unemployment rate fell because more people got jobs," the report said.

The report also said that low unemployment rate means faster hikes in the interest rate to "head off a potential spike in inflation as wages ratchet higher".

The report said the Federal Reserve predicted that unemployment rate would be 3.8 per cent by the year-end and since it is already 3.9 per cent, the eventual unemployment figure could be even less, leading to an even quicker rise in interest rates.