The runaway train of the recent labor market slowed down in April, in a welcome – albeit unexpected – break from ongoing concerns over inflation in the economy.
The U.S. economy added 175,000 jobs last month, according to the Bureau of Labor Statistics, a marked decline from previous months. The unemployment rate increased from 3.8% in March to 3.9% in April, continuing a 27-month run below 4%. Wage growth continued to gradually weaken, too.
The job numbers are lower than economists predicted, but the solid gain shows the job market is still progressing at a healthy clip. The report follows several months of stronger-than-expected job gains across major U.S. industries that added to fears of unflagging inflation. If the cooler numbers last longer than April, it could mark the beginning of an easing of the job market.
“This morning is welcome news, because it helps offset some of the higher readings as we have been getting on the inflation side of the U.S. economy,” said Kenneth Kim, a senior economist at KPMG.
An offset to inflation would be a relief to investors, who are anxiously waiting on the Federal Reserve to budge on interest rate cuts. On the flip side, workers could see a lessening in the enhanced bargaining power they enjoyed in recent years. Earlier this week, the BLS also released the monthly survey numbers on job openings and layoffs. Both measures came in low in a sign that post-pandemic demand for workers is easing.
Friday’s report saw fluctuations in some of this year’s strongest industries. Growth in the healthcare industry made up 50% of jobs added in April, in a trend that is expected to continue as the U.S. population grays and requires more medical assistance.
Jobs added in both the public sector and leisure and hospitality saw large pullbacks from March – a dip that economists found hard to explain. Up until April, the two industries were alongside healthcare in pulling up the rest of the jobs numbers. Leisure and hospitality went from adding 53,000 jobs in March to just 5,000 in April. Similarly, Public-sector employment increased by just 8,000 jobs overall in April, after averaging close to 62,000 jobs per month between January and March.
Andrew Zatlin, founder of the forecasting company SouthBay Research, was surprised by the apparent collapse, particularly in hospitality.
“You might tap the brakes, but you don’t hit the brakes,” he said, attributing part of the decline to an early April pattern of widespread and severe storms, to which leisure industries are vulnerable.
Continued slowdowns in white collar hiring could be a sign that high inflation and high interest rates are catching up to companies. The ‘tech-cession’ has seen mass layoffs this year at Alphabet, Apple and Tesla. Andrew Flowers, the chief economist at Appcast, pointed to a trend of more security in blue collar jobs.
“Chat GPT is not replacing a roofer right now,” said Flowers. “You can’t yet replace waiters and waitresses with robots, and so those standing up occupations are doing quite well.”
Like the healthcare sector, manufacturing maintained growth. Kiley Schottenfeld, who has worked in human resources at a national food and agribusiness since 2021, said manufacturing jobs are getting harder to fill against competition with large warehouse employers, like Amazon. Schottenfeld said a lot of hourly workers still have the upper hand.
“You do have to sift through quite a few applications, the other thing we’re seeing is people will just apply and not call back,” Shottenfeld said.
Bob Larson, the president of a 40-year-old staffing firm based in New Jersey, is seeing less turnover at his client companies, but his firm’s current focus – medical technology – is a relatively strong marketplace. The more niche the role, he said, the harder it is to fill.
“On the medical technology side, I’ve seen a very severe competition for talent,” Larson said.
Administrative roles, on the other hand, are quick to go. Larson said the problem is that salaries aren’t meeting expectations. Candidates expect salaries that pay for continued cost of living increases, he said, but they are finding companies less willing to go above the going market value.
“They’ll talk to us about a prospective job we have for them, but they want the potential client hiring to go out of that range and go above the going rate for their skill set,” Larson said.
The April jobs numbers aren’t all bad news for workers. The demographics underlying the unemployment numbers showed strides for historically marginalized workers. The unemployment rate of Black Americans decreased in April, after a brief period of upticks. A record number of 25 to 54-year-old women participated in the labor force in April, at 78%.
Markets on Friday demonstrated enthusiasm over the cooler jobs numbers, but economists caution that inflation remains a concern. Inflationary measures like the consumer price index and retail sales came in hotter than expected recently. Steadily low unemployment, softer jobs numbers and cooling wages are all good news for the Fed, but consistent moderation needs to be seen before long-awaited interest rate cuts arrive. Both KPMG and Moody’s predict one rate cut in December, but the markets – as usual – are slightly more optimistic.
With six months until the presidential election, the labor market and Fed decisions are more important than ever. Comments made by the presumptive nominees in the wake of Friday’s report show just how contentious issues of the economy will be in November.
“The job numbers just came out, and they’re horrible, and I say that not happily,” Donald Trump told reporters.
President Joe Biden took a wholly opposite approach to the report, saying in a statement, “the great American comeback continues.”
