US unemployment rate drops to 3.9% in April

According to the Bureau of Labor Statistics, job growth in the States picked-up from the 135.000 pace observed in March to a 164,000 clip for April.

That was shy of economists' forecasts for a gain of 185,000, although upwards revisions to figures covering the previous two months helped to make up for the shortfall.

The biggest gains in hiring came in Manufacturing (+24,000) and Professional and business services (+54,000).

However, the rate of unemployment, which is derived from a separate survey than that used to estimate non-farm payrolls, fell by two tenths of a percentage point to 3.9% last month - its lowest level since 2001.

In 2000, just before the so-called Internet bubble burst, unemployment troughed at 3.8%.

Economists had predicted that the rate of unemployment would dip to 4.0%.

April's fall in the rate of unemployment came as the US labour force shrank by 236,000 and the number of unemployed declined by 239,000 as some Americans stopped looking for work, pushing the labour force participation rate from 62.9% for March to 62.8% in April.

Nonetheless, commenting on the data, Michael Pearce, Senior US economist at Capital Economics, pointed out that in parallel the broader U6 measure of unemployment had retreated by three tenths of a percentage point to a 17-year low of 7.8%.

And despite the drop-off in hiring over the past three months, the average for the last six month was still a "high" 198,000, he said.

Government statisticians revised their previous estimates of US non-farm payrolls in February and March up by a combined 30,000.

Average hourly earnings meanwhile were 0.14% higher month-on-month (consensus: 0.2%), dragging the year-on-year rate of increased from 2.7% to 2.6% (consensus: 2.7%).

Together with the continuing trend higher in the US employment cost index - an alternate mesure of wage growth - the drop in U6 meant that the Federal Reserve would not be too bothered with the lower-than-expected turnout in wages, Pearce added.

"Accordingly, we still expect the Fed to press ahead and raise rates again in June, and a total of four times in 2018."

For their part, analysts at TD Securities chipped in: "All told, today's report confirms to the Fed that a gradual pace of rate hikes remains appropriate. The market may have gotten a little ahead of itself in looking for a burst of inflation and a more hawkish Fed."

In reaction to the data, as of 1434 BST the yield on the benchmark 10-year US Treasury note was off by two basis points at 2.93% after hitting an intraday low of 2.91% after the release of the employment report.

At the shorter end of the curve, the two-year note yield was at 2.47%, which earlier had traded as low as 2.46%.