Minneapolis (CNN) High prices, rising interest rates and bank uncertainty be damned: the US labor market is still struggling.
Employers added 253,000 jobs in April, the Bureau of Labor Statistics reported Friday.
That’s a good deal more than economists had expected, making this job report the 12th of the last 13 to come in “hot.”
Here are some takeaways from the report and what it could mean for workers, job seekers, employers, the Federal Reserve and everyone in between:
The labor market is “unstoppable”[ads1];
As the Federal Reserve began its deflationary campaign back in March 2022, concerns grew about the potential collateral damage: How many Americans could lose their jobs as a result?
The blunting effect of interest rate hikes – which make it more expensive to borrow money and in turn reduce demand and prices – was expected to send a chill through the country’s red-hot labor market, which at the time had a historically low unemployment rate of 3.6%.
Fourteen months and 5 percentage points later, the economy added more than a quarter of a million jobs, and the unemployment rate fell again to a decade-low 3.4%.
“The US labor market right now is simply unstoppable,” RSM economist Joseph Brusuelas wrote in a note Friday. “It’s kind of like how sports commentators used to describe defending basketball great Michael Jordan: You can’t stop him, you can only hope to contain him.”
And for job seekers and workers, it’s a great thing:
“You want a job, it’s yours for the asking,” Chris Rupkey, chief economist at FwdBonds, wrote in a note.
Fueling hopes of a ‘soft landing’
Last month’s job growth may have been stronger than economists expected, but the latest BLS report also noted that the previously reported estimates for February and March were revised down by a combined 149,000 jobs.
These revisions bring average job growth down to 222,000 over the past three months. While that’s above the average monthly gain of 183,000 seen in the decade before the pandemic, it’s well below what was seen during the economic upswing of the past two years (when monthly job gains averaged 399,000 in 2022 and 606,000 in 2021 ).
– We are seeing a slowdown in the labor market, and that is good news from an inflation perspective, says Gus Faucher, chief economist at PNC Financial Services Group, to CNN. “Companies are still trying to hire, the demand for labor is still strong, but it’s not quite as strong as it was even at the end of 2022. For companies, it seems they’re finding that maybe it’s a little bit easier to find workers now.”
The ongoing resilience of the labor market also helps bolster hopes that it is still possible for the Fed to bring down inflation without throwing millions of people into unemployment and triggering a recession.
“This is what a soft landing would look like, with job growth gradually slowing to a more sustainable pace,” Faucher added. “That said, we probably won’t know if we’ve achieved a soft landing until the end of this year.”
A milestone for black unemployment
The black unemployment rate fell to a record low in April for the second month in a row, providing fresh evidence of America’s historic job boom.
The black unemployment rate fell to 4.7% last month, compared to 5% the month before. That is the lowest level on records going back to 1972 and is a sharp drop from 5.7% as recently as February.
The milestone comes just three years after the Covid-19 pandemic caused mass layoffs that pushed the black unemployment rate as high as 16.8%.
While this is promising news, the decline was accompanied by a drop in black labor force participation and employment, said Heidi Shierholz, a former chief economist at the Labor Department who now serves as president of the Economic Policy Institute.
“Make no mistake, the black one [unemployment] the rate is still too high,” Shierholz tweeted. “Because of the impact of structural racism on the labor market, [Black & Hispanic workers] has much higher [unemployment] prices than White [workers]. But the strong job recovery has taken its toll [Black and Hispanic unemployment] down much faster than before.”
Wage growth picks up again: Good for the consumer and the economy, but not the Fed
Friday’s jobs report showed average hourly earnings rose 16 cents, or 0.5%, in April to $33.36, the biggest month-over-month increase since March 2022, although wage growth had cooled since then.
From a year earlier, wages increased 4.4%, slightly up from the previous month, but down from a 5.9% increase in March last year.
Strong wage growth complicates the Fed’s mission to reduce price increases because higher labor costs can put upward pressure on inflation.
When wages rise, it is good news for consumption and the economy. But for the Fed, it’s a roadblock, noted Scott Anderson, chief economist at Bank of the West.
“The more stubborn the resiliency in job and wage growth, the longer the Fed will need to stay on a tight monetary policy, and the greater the chance of an economic slowdown at some point this year,” he wrote.
“Cracks Are Appearing”
In the first four months of the year, job growth has averaged 285,000 per month, more people are participating in the labor market, and job gains are happening in even some of the most challenged sectors such as manufacturing and construction, said Wells Fargo economist Sarah House. and Michael Pugliese wrote in a note.
But the storm clouds are gathering.
“With each passing month, the tailwind from post-lockdown re-staffing efforts weakens, while the hiring headwind from tighter monetary policy strengthens,” they wrote. “The job market remains on solid ground, but cracks are appearing. Job applications are ticking higher, unemployment is falling rapidly, and temporary help employment fell once again in April, with the latter a useful indicator of growth in demand for marginal labor .”
Next up: Key lending and inflation data and debt ceiling discussions
A lot can happen, and a lot of data will fall between now and the Fed’s next meeting, in June.
Some key economic reports will be released next week, including the Senior Loan Officer Opinion Survey on Monday, which will provide some insight into lending conditions, and the key inflation measures of the Consumer Price Index and Producer Price Index.
Separately, President Joe Biden is expected to meet with congressional leaders to hold discussions on raising the debt ceiling.
Not doing so would be “unprecedented,” Fed Chairman Jerome Powell said this week, adding that the consequences for the US economy could be highly uncertain and “quite adverse.”
— CNN’s Matt Egan and Bryan Mena contributed to this report.