CNN
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U.S. job growth slowed significantly last month, with just 175,000 jobs added in April, according to Bureau of Labor Statistics data released Friday.
Growth has been slower than expected, with April’s data being the lowest since October of last year, as the Federal Reserve seeks to cool demand to curb high inflation.
Economists expect the labor market to gradually slow due to pressure from high interest rates.
The market soared on the news, with Dow futures up 505 points, or 1.3%. S&P 500 futures rose 1.1% and Nasdaq futures rose 1.5%.
April payrolls are significantly lower than the upwardly revised 315,000 job increase in March, but are consistent with pre-pandemic levels and represent a neutral employment growth rate that keeps pace with population growth. It has become. During his decade before the pandemic, which was also the longest period of job growth in U.S. history, monthly job growth averaged 183,000.
“Overall, the labor market remains pretty strong and pretty tight,” Wells Fargo senior economist Michael Pugliese said in a CNN interview Friday. “This is very different from the completely weak labor markets we saw in 2020 or 2009 or the last 15 years or so.”
“But it is clear at this point that the labor market is not as tight as it was at its peak at the end of 2021 and most of 2022.”
The unemployment rate rose to 3.9%, according to the Bureau of Labor Statistics. The unemployment rate remained below 4% in April for the 27th consecutive month, tying the lowest streak since the late 1960s.
Economists had expected 235,000 jobs to be added last month and the unemployment rate to hold steady at 3.8%, according to FactSet consensus estimates.
Almost half of the employment gains in April (approximately 87,000 jobs) were in the health and social assistance sector, the main driver of employment growth. The remaining employment gains were fairly widespread across other industries, with some of the larger gains recorded in transportation, warehousing, and retail.
In early 2024, the economy appeared to be accelerating. Inflation data remained strong, spending remained strong, wage growth slowed less than expected, and employment growth exceeded that of 2023.
But there were signs that a cooldown was coming. In the labor market in particular, wage growth is slowing, and turnover data shows fewer job openings, slower hiring activity, and fewer people leaving the workforce.
“i don’t think so [175,000 net gain] These are fateful and dark numbers. I think that’s a good number,” Jane Oates, a former Department of Labor official and senior policy advisor at the employment and education nonprofit Working Nation, told CNN.
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The question in the coming months is whether this will create a new normal in the labor market, he added.
Friday’s report also included a revision that would reduce estimated job growth by 22,000 jobs in February and March combined, and the pace of job growth is now slightly lower than last year, according to BLS data. It’s below.
Through April, U.S. employers added an average of 245,500 jobs per month, compared to an average of 251,000 per month in 2023.
The labor force participation rate remained stable at 62.7%. But Friday’s report showed that participation among prime-age people, especially women, is increasing.
The labor force participation rate for women aged 25 to 54 increased by 0.3 percentage points to a record high of 78%.
Additionally, the unemployment rate for black workers fell to 5.6% (February unemployment rate) after spiking to 6.4% in March. Economists at the time warned that the increase was “more likely to be a signal than noise” given the volatility in household employment surveys. However, this was an important data point to note.
What this means for the Fed and interest rates
Wage growth has also slowed noticeably, with average hourly wages increasing 0.2% from March and 3.9% over the past year. Annual wage growth, as measured by the BLS, is at its lowest level since May 2021.
Fed officials are closely monitoring the trajectory of wage growth amid concerns that faster compensation growth could put pressure on inflation.
Federal Reserve Chairman Jerome Powell said earlier this week that the central bank should not ease its tight monetary policy until either inflation clearly slows (it was very high this first quarter) or the labor market suddenly and unexpectedly weakens. Said not to start.
Economists and analysts said Friday’s report would not trigger an increase in the latter, although April’s job growth was weak.
“For those hoping for an early rate cut, this slowdown in employment growth is good news, and the slowdown in wage growth is even better news,” Ol Sonora, head of U.S. economic research at Fitch Ratings, said in a statement. ” he said.
“But trends don’t form in one month, so the Fed will need to see this type of easing continue for several months, combined with improving inflation data, before it resumes rate cuts sooner rather than later.”
Wells Fargo’s Mr. Pugliese said that while the jobs report is important to the Fed, “what’s really moving the bus here is the inflation report.”
“As long as employment growth stays in a fairly large range of more than 100,000 people and less than 350,000 people, which is not about to fall off a cliff or is running at a super, super high pace, it is a real major variable. What I think is going to happen is [inflation] “I’m reporting it,” he said.
The next report on the Consumer Price Index, the most widely used measure of inflation, will be released on May 15th.
Correction: This article has been updated to correct the date of the next CPI release. It’s May 15th.