The U.S. economy added slightly more jobs than expected in April amid an increasingly tight labor market and despite surging inflation and fears of a growth slowdown, the Bureau of Labor Statistics reported Friday.
Nonfarm payrolls grew by 428,000 for the month, a bit above the Dow Jones estimate of 400,000. The unemployment rate was 3.6%, slightly higher than the estimate for 3.5%. The April total was identical to the downwardly revised count for March.There also was some better news on the inflation front: Average hourly earnings continued to grow, but at a 0.3% level for the month that was a bit below the 0.4% estimate. On a year-over-year basis, earnings were up 5.5%, about the same as in March but still below the pace of inflation.
An alternative measure of unemployment that includes discouraged workers and those holding part-time jobs for economic reasons, sometimes referred to as the “real” unemployment rate, edged higher to 7%. Unemployment for Blacks has showed a steady decline and fell again, to 5.9%, while Hispanic unemployment dropped to 4.1%.“The job market continues to plow forward, buoyed by strong employer demand. After just over two years of the pandemic, the job market is remaining resilient and on track for a return to pre-pandemic levels this summer,” said Daniel Zhao, senior economist at jobs review site Glassdoor. “However, the job market is showing some signs of cooling as it turns the corner and the recovery enters a new phase.”
The labor force participation rate, a key measure of worker engagement, fell 0.2 percentage points for the month to 62.2%, the first monthly decline since March 2021 as the labor force contracted by 363,000. The level is of particularly importance with a gap of about 5.6 million between job postings and available workers.
“Demand for labor remains very strong; the problem is a shortage of available workers, and the decline in the labor force participation rate in April could add to wage pressures,” wrote PNC chief economist Gus Faucher.
Leisure and hospitality again led job growth, adding 78,000. The unemployment rate for the sector, which was hit hardest by the Covid pandemic, plunged to 4.8%, its lowest since September 2019 after peaking at 39.3% in April 2020. Average hourly earnings for the sector increased 0.6% on the month and are up 11% from a year ago.
Other big gainers included manufacturing (55,000), transportation and warehousing (52,000), Professional and business services (41,000), financial activities (35,000) and health care (34,000). Retail also showed solid growth, adding 29,000 primarily from gains in food and beverage stores.
Some of the details in the report, though, were not as strong.
The survey of households actually showed a decline of 353,000, leaving the level 761,000 short of where it was in February 2020, just prior to the start of the pandemic. April marked the first monthly decrease in the household survey since April 2020.
Stock futures moved lower as Wall Street digested the report and government bond yields were mostly higher.
The report likely will do little to sway the Federal Reserve from its current path of interest rate increases. The central bank announced Wednesday it would increase its benchmark interest rate half a percentage point in what will be an ongoing effort to stamp out price increases running at their fastest pace in more than 40 years.
“Overall, with labor market conditions still this strong — including very rapid wage growth — we doubt that the Fed is going to abandon its hawkish plans because of the current bout of weakness in equities,” said Paul Ashworth, chief U.S. economist at Capital Economics.
The job growth comes with U.S. economy experiencing its worst growth quarter since the start of the pandemic and worker output for the first three months that declined 7.5%, the biggest slowdown since 1947 and the second-worst quarter ever recorded. GDP was off 1.4% for the January-through-March period.