The US economy added slightly more jobs than expected in April amid an increasingly tight labor market and despite rising inflation and fears of a slowdown in growth, the Bureau of Labor Statistics reported Friday.
Nonfarm payrolls grew 428,000 this month, slightly above the Dow Jones estimate of 400,000. The unemployment rate was 3.6%, slightly higher than the estimate of 3.5%. The April total was identical to the downwardly revised March count.
There was also better news on the inflation front: the average hourly wage continued to grow, but at 0.3% for the month, it was slightly below its estimate of 0.4%. On an annual basis, profits rose 5.5%, about the same as in March, but still below inflation.
An alternative measure of unemployment, which includes discouraged workers and those who work part-time for economic reasons, known as the ‘true’ unemployment rate, rose to 7%. Unemployment for blacks has steadily declined, falling again to 5.9%, while unemployment for Latin Americans has fallen to 4.1%.
“The job market continues to plow, fueled by strong demand from employers. After just over two years of the pandemic, the job market remains resilient and on track for a return to pre-pandemic levels this summer,” said Daniel Zhao, senior economist at job boards Glassdoor. “However, the labor market is showing some signs of cooling as it turns the corner and the recovery enters a new phase.”
The employment rate, a key measure of employee engagement, fell 0.2 percentage points for the month to 62.2%, the first monthly decline since March 2021, as the workforce shrank by 363,000. The level is particularly important with a gap of about 5.6 million between vacancies and available employees.
“Demand for labor remains very strong; the problem is a shortage of available labor, and the decline in the labor force participation rate in April could increase wage pressures,” wrote PNC chief economist Gus Faucher.
Leisure and hospitality again led to job growth, with 78,000 additional jobs. The unemployment rate for the sector, hardest hit by the Covid pandemic, fell to 4.8%, the lowest since September 2019 after peaking at 39.3% in April 2020. Average hourly wages for the sector rose by 0 .6% on a monthly basis and is up 11% from a year ago.
Other big winners were manufacturing (55,000), transportation and warehousing (52,000), professional and business services (41,000), financial activities (35,000) and healthcare (34,000). Retail also showed solid growth, with 29,000 additions, mainly driven by gains in food and beverage stores.
However, some details in the report were not so strong.
In fact, the household survey showed a decrease of 353,000, bringing the level of 761,000 down from February 2020, just before the start of the pandemic. April marked the first monthly decline in the household survey since April 2020.
Equity futures fell as Wall Street processed the report and government bond yields tended to be higher.
The report is likely to do little to steer the Federal Reserve off its current path of rate hikes. The central bank announced on Wednesday that it would raise its benchmark interest rate by half a percentage point, which will be an ongoing effort to weed out price increases that have happened at the fastest rate in more than 40 years.
“Overall, with labor market conditions still strong – including very rapid wage growth – we doubt the Fed will abandon its aggressive plans due to the current weakness in equities,” said Paul Ashworth, chief US economist at Capital Economics. †
Job growth comes with the U.S. economy experiencing its worst growth quarter since the start of the pandemic and worker output for the first three months falling 7.5%, the worst slowdown since 1947 and the second worst quarter on record. GDP fell by 1.4% for the period January to March.