Employers added 253000 jobs last month and unemployment fell to 3.4 %
By guest author Sarah Chaney Cambon from the Wall Street Journal. Nick Timiraos contributed to this article.
Updated May 5, 2023
Americans landed jobs and their wages increased in April, showing the labor market remained resilient amid banking turmoil, rising interest rates and high inflation.
Employers added 253000 jobs in April, the best gain since January, the Labour Department said Friday. Job growth was revised lower in February and March. The unemployment rate fell to 3.4 % last month, matching the lowest reading since 1969.
Low joblessness kept upward pressure on wages, which grew 4.4 % in April from a year earlier, up slightly from a 4.3% annual increase in March. Average hourly wages rose 0.5 % from a month earlier to USD 33.36.
Over the past year, inflation hit historic highs, economic growth slowed, the Federal Reserve rapidly raised interest rates and stress emerged in the banking sector. Many economists anticipated that those challenges would trigger the labor market to crack.
So far, it hasn’t.
“The American labor market is simply unstoppable right now,” said Joe Brusuelas, chief economist at RSM US LLP.
Stocks climbed after the jobs report. The Dow Jones Industrial Average added nearly 550 points Friday, or 1.65 %. The S&P 500 rose 1.85 %. The tech-heavy Nasdaq was 2.2 5 % higher. The yield on the 10-year Treasury note rose to 3.445 % from 3.350 %.
Friday’s data do little to clarify the outlook for Fed policy because officials will have one more employment report before their June 13-14 meeting and because they are paying closer attention to banking stress.
Fed officials raised their benchmark federal-funds rate this week to a range between 5 % and 5.25 %, the highest level in 16 years, to slow down the economy and combat inflation. Fed Chair Jerome Powell suggested that the central bank might pause rate rises after that to study the impact of its rapid increases over the past year and assess any fallout from the failures of three midsize banks since March.
The strong report could complicate the Fed’s deliberations and helps explain why officials think that if they do adjust interest rates, the next move is more likely to be up than down. “There were pockets of strength in the data, but the bar for resuming hikes is also higher now,” said Derek Tang, an economist at the forecasting firm LH Meyer. “Delayed easing will be the new tightening.”
On Friday, investors saw just a 7 % chance that the Fed would raise rates at its next meeting, and they see rising chances of a cut after that, according to CME Group. Interest-rate futures markets imply a 75 % probability that the Fed will have cut rates below current levels by September.
April’s monthly payrolls increase was slightly below the average monthly gain of 290000 over the prior six months. Employment in February and March was revised down by a total of 149000.
After mass layoffs in early 2020 during pandemic lockdowns, hiring surged in the middle of that year. Job gains have moderated since, but have trended above the pace in the year before the pandemic began.
Friday’s report showed job gains in most industries, even ones such as construction that are particularly sensitive to interest-rate increases. Businesses in professional and business services, healthcare, and leisure and hospitality bulked up with workers in April. Temporary-help agencies cut jobs.
Goodheart Animal Health Center has hired front-desk staff as well as veterinarians and nurses in recent months to meet the demand from pet owners bringing their dogs and cats in for checkups and surgeries, said Alex Robb, medical director at one of the two Denver locations. The pandemic spurred a rise in pet ownership.
The centre has increased wages to retain existing employees in an industry suffering from high levels of worker burnout, Dr. Robb said. “You can’t underpay folks and expect them to stay,” he said.
The hospital has raised pay an average of about 10% in the past 16 months. Receptionists now make between $18 and $20 an hour and nursing staff between $21 and $25. Goodheart also raised prices last year including for lab work and surgical fees, helping offset the higher labour costs.
Annual wage growth has cooled from a recent peak of 5.9 % in March 2022, but remains well above 2019 pay raises of roughly 3 %. Employers in construction, leisure and hospitality and mining posted among the fastest wage gains in April from a year earlier.
Rising wages and low unemployment are fueling consumer spending, the economy’s main driver. Consumers were a bright spot in the first quarter as broader economic growth cooled from late last year due to a slowdown in business investment and a weak housing market.
The pandemic drove a huge wedge between the supply and demand for workers. That has started to come into better balance in recent months, with job openings falling and more workers entering the labor force.
In April, 83.3 % of Americans in their prime working years, ages 25 to 54, were employed or seeking jobs, the highest share since 2008. The influx of job seekers is helping restaurants, bars and hotels snap up workers, after they struggled with acute labor shortages for much of the pandemic.
Pushed by renewed demand to travel and socialize, leisure and hospitality businesses added about 900,000 jobs over the past year, almost a quarter of all jobs gained.
The strong labor market has delivered gains to workers who suffered from steep job losses three years ago. The unemployment rate for Black Americans fell to 4.7 % last month, the lowest on records dating back to 1972. The jobless rate for Hispanic workers declined to 4.4 %, a historically low level.
There are signs of softening momentum in the labor market. Some industries—including retail, finance and manufacturing—have hired much more slowly than others over the past year amid weaker demand.
Demand for metal parts has slowed over the past 18 months at Birmingham, Ala., manufacturer DSW Cutting, President Chris McIlvaine said. DSW makes parts used in tractors, lawn mowers and electrical hardware.
Weaker sales and production volumes mean less need for workers. The 75-person company is looking to hire four employees, fewer than it sought to hire in 2021 when business was booming.
“Things are not terrible, but they’re not nearly as active as they were,” Mr. McIlvaine said. “It’s been a very strange economy.”