The US labor market cooled notably last month as both hiring and wage growth slowed more than economists had expected in April.
The US economy added 175,000 new jobs and the unemployment rate rose to 3.9% last month, new data from the Bureau of Labor Statistics showed Friday. Wall Street economists had expected nonfarm payrolls to rise by 240,000 and the unemployment rate to remain at 3.8%, according to Bloomberg data.
Wages also rose less than forecast, with average hourly earnings rising 0.2% over last month and 3.9% over the last year. Economists had expected to see a monthly jump of 0.3% in April and a 4% rise over last year.
Friday’s report also showed February’s job growth revised down — to a gain of 236,000 nonfarm payroll jobs from the 270,000 previously reported — while March’s report was revised up to job gains of 315,000 from the 303,000 initially reported.
Ahead of Friday’s report, economists had flagged revisions as important to watch, as the last year has seen the average month’s payroll gains revised down by 13,000 jobs.
The length of the average workweek fell last month, to 34.3 from 34.4. The underemployment rate, which includes the unemployed and those marginally attached to the workforce, rose to 7.4%.
By industry, the narrow gains in the labor market seen this year continued, with healthcare and social assistance employment increasing by a combined 87,000 in April, accounting for almost exactly half the overall growth in nonfarm employment.
Retail and transportation and warehousing were the only two industries outside of healthcare and social assistance that saw payroll growth north 20,000 last month.
“We suspect the near-record warm winter explains some of the strength over the preceding four months,” wrote Paul Ashworth, an economist at Capital Economics, in an email on Friday, “and April’s renewed slowdown bears that out a little — with construction employment up by only 8,000 and leisure & hospitality rising by a trivial 5,000.”
The slowdown in wage growth seen last month also helps the case for the Federal Reserve to lower interest rates at some point this year. Even as inflation data have remain higher than the central bank’s 2% target and shown “bumpy” progress toward that level in recent months.
Earlier this week, data from the BLS suggested wage pressures building after the Employment Cost Index (ECI) accelerated in the first quarter of 2024 to reach its highest level in a year.
In a press conference on Wednesday, Fed Chair Jerome Powell downplayed the idea that wage pressures today are creating a meaningful inflationary impulse, noting “essentially all wage measures have come down substantially” from peaks reached after the pandemic.
Average hourly earnings, for instance, grew more than 5% annually during each month between September 2021 and December 2022.
“Forward-looking indicators like the JOLTS quits rate point to more slowing in wage growth,” wrote Nancy Vanden Houten, lead US economist at Oxford Economics, in a note ahead of Friday’s jobs report.
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