America’s labor market maintained its strong momentum in April, as the U.S. economy added 428,000 jobs — above the consensus estimate of 395,000. The unemployment rate remained unchanged at 3.6 percent.
Average hourly earnings for workers climbed by 0.3 percent month-on-month, a slower pace than the 0.5 percent seen last month. Year-on-year, earnings were up 5.5 percent, compared with an inflation rate of 8.5 percent. That means many workers, even if employed, may not be benefiting from the post-pandemic economic recovery.
The data will most likely keep pressure on the Federal Reserve to act aggressively to pull inflation down from 8 percent to 2 percent.
Economists believe the Fed is likely to raise rates by another 0.5 percent in June. In a news conference Wednesday following the Fed’s announcement of a 0.5 percent interest rate increase for May, Chairman Jerome Powell noted that labor demand remained “very strong,” while labor supply remained subdued.
“Employers are having difficulties filling job openings, and wages are rising at the fastest pace in many years,” Powell said.
The factors that led to the so-called Great Resignation — too-low wages, federal economic stimulus, higher savings and workers seeking to avoid in-person jobs amid the pandemic — appear to be persisting.
Now, to fight inflation, Powell and the Fed are seeking to guide economic growth down to a trend where workers would keep their existing jobs while businesses would announce fewer job openings. This week, the U.S. Department of Labor announced job openings had increased from 11.3 million to 11.5 million in April — a new all-time high.
To fill those openings, employers have been increasing wages — something that is designed to bring more workers into the labor force.
But Friday’s data showed that may no longer be working — the pace of people rejoining the labor force fell in April. Meanwhile, the rate of individuals transitioning from being out of the labor force entirely to having a job declined for the third straight month, something that hasn’t happened since the economy went into its pandemic-induced recession in the spring of 2020.
Friday’s data also showed the pace of hiring slowed in retail; leisure; professional and business services; and administrative and support services.
After a dramatic sell-off Thursday, stocks opened Friday trading down more than 1 percent, a sign markets may also be seeing signs of cooling.
The overall mixed data in Friday’s report have resulted in economists differing on what it means next for the Fed, and the U.S. economy more broadly.
In a note to clients following Friday’s jobs numbers, Pantheon Macroeconomics Chief Economist Ian Shepherdson said that if wage numbers keep showing “meaningful slowing,” the urgency on the Fed to slow inflation may not be as great as feared.
“The relative softness has now persisted for three months, and it’s starting to look like a trend,” he said.
But Paul Ashworth, chief U.S. economist at Capital Economics, sees sustained pressure on the Fed to keep raising rates, noting that despite their recent slowdown in growth, wages are still climbing at a much faster pace than before the pandemic.
“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,” he wrote.
CORRECTION (May 6, 2022, 5:23 p.m. ET): A previous version of this article stated the March 2022 inflation rate as 8.2%. It was 8.5%.